Budget. 2006-2007.

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2006/ 07 Adopted Operating Budget
City Council
Bob Wasserman, Mayor
Steve Cho, Vice Mayor
Dominic D. Dutra, Councilmember
Bob Wieckowski, Councilmember
Anu Natarajan, Councilmember
Executive Management Team
Fred Diaz, City Manager
Harvey E. Levine, City Attorney
Christine Daniel, Deputy City Manager
Melissa Stevenson Dile, Deputy City Manager
Dawn Abrahamson, City Clerk
John Bjurman, Information Systems Director
Nancy Carlson, Human Resources Director
Harriet Commons, Finance Director
Daren Fields, Economic Development Director
Annabell Holland, Parks & Recreation Director
Norm Hughes, City Engineer
Jill Keimach, Community Development Director
Bruce Martin, Fire Chief
Jim Pierson, Transportation & Operations Director
Jeff Schwob, Planning Director
Suzanne Shenfil, Human Services Director
Craig Steckler, Chief of Police
Elisa Tierney, Redevelopment Director
Budget Team
Jim Becklenberg, Budget Manager
Ray Durant, Assistant Finance Director
Don Dorman, Management Analyst II
Tricia Fan, Senior Accountant
Lisa Goldman, Intergovernmental Relations Manager
Kim Pedersen, Executive Assistant/ Graphic Artist
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The Government Finance Officers Association
of the United States and Canada ( GFOA)
presented an award for Distinguished
Presentation to the City of Fremont
for its annual budget for the fiscal
year beginning July 1, 2005.
In order to receive this
award, a governmental unit
must publish a budget
document that meets
program criteria as a policy
document, as an operations
guide, as a financial plan
and as a communications
device.
The award is valid for a period
of one year only. This is the
eighth consecutive year the City
has earned the award. We believe
our current budget continues to
conform to program requirements.
Acknowledgments
Putting together a budget requires a great deal of effort from many people.
The City Manager and Budget Team would like to thank the Budget and
Accounting Services Staff, Department Budget Coordinators and others
for their invaluable assistance:
Department Budget
Coordinators
Susan Aro
Cheryl Bourne
Charlie Caulfield
Catherine Chevalier
Budget and Accounting
Services Staff
Corina Campbell
Gloria I. del Rosario
Krysten Lee
Tish Saini
Ellen Zhou
Kelly Morariu
Dan Schoenholz
Kelly Sessions
Karena Shackelford
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Guide to the Document
! Table of Contents ............................................................................... 3
! Guide to the Document ...................................................................... 5
Budget Overview
! Budget Overview ............................................................................... 7
Summary Information
! Citywide Organization Chart ............................................................ 17
! City of Fremont Profile .................................................................... 19
! All City Funds Schedule ................................................................... 23
! Citywide Position Changes ............................................................... 25
! City Debt Summary .......................................................................... 27
! Gann ( Appropriation ) Limit ............................................................. 31
! Citywide Goals and Objectives ........................................................ 33
General Fund
! Fund Overview ................................................................................. 39
! Fund Revenues ................................................................................. 57
! Forecast ............................................................................................ 71
! Transfer Detail ................................................................................. 72
! Historical Comparison ...................................................................... 73
Other Funds
! Other Funds ...................................................................................... 75
! Cost Centers & Internal Service Funds ........................................... 77
! Special Revenue Funds .................................................................... 87
! Redevelopment Agency Funds ......................................................... 93
! Capital Funds .................................................................................... 97
Capital Budget Summary
! Capital Budget Summary ............................................................... 101
Department Budgets
! City Council ..................................................................................... 111
! Community Development ................................................................ 113
! Economic Development .................................................................. 119
! Fire ................................................................................................. 123
! Housing & Redevelopment ............................................................ 129
• Redevelopment Agency Project Highlights ............................... 131
Table of
Contents
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! Human Services ............................................................................. 137
! Parks & Recreation ....................................................................... 143
! Police .............................................................................................. 147
! Transportation and Operations ....................................................... 153
! Administrative Departments ........................................................... 159
• City Manager............................................................................. 161
• City Attorney ............................................................................. 163
• City Clerk .................................................................................. 167
• Finance ...................................................................................... 169
• Human Resources ..................................................................... 171
• Informations Systems ................................................................ 173
Staffing
! Permanent Position Summary ........................................................ 175
Policies & Glossary
• Policies and Practices ............................................................... 181
• Glossary of Budget Terms ......................................................... 201
Resolutions
• City of Fremont Budget Adoption Resolution ............................ 207
• Appropriations Limit Resolution ................................................. 211
• Fremont Redevelopment Agency Budget Resolution ................ 213
Table of Contents
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Guide to the
Document
The budget is both a spending plan for the City’s available financial resources
and the legal authority for City departments to spend the resources for
public purposes. Through these resources, services are provided to meet
the needs of Fremont residents. The City Council and City staff respond to
the community’s needs in part through the budget. It balances not only
revenues and costs, but also community priorities and interests.
Document Organization
Budget Overview
The City Manager’s Budget Overview sets the context for budget decisions
by describing community and economic conditions affecting the budget. It
outlines major initiatives underway and challenges for the coming year.
Summary Information
This section of the document presents an overall picture of the City and the
budget. It includes a description of the community, an organization chart,
summary financial tables, a summary of Citywide staffing changes
associated with the budget, and documentation of the City’s compliance
with State statutes and City policies regarding total expenditures and debt.
The section also presents a summary of departmental service objectives in
a table that shows objectives’ alignment with citywide goals.
General Fund
Local government budgets are organized by funds in order to segregate
and account for restricted resources. Each fund is a separate accounting
entity. The General Fund provides the majority of resources for most of
the services cities typically provide, including the public safety, maintenance,
and general government functions required to support direct services to the
community. This section provides an analytical overview of the General
Fund for the budget year. This section also places the budget in context
with the financial forecast and provides a five- year historical review of
General Fund sources and uses.
Other Funds
The Other Funds section contains information regarding non- General Fund
sources of revenue. These funds are grouped into Cost Centers and Internal
Service, Special Revenue, Redevelopment Agency, and Capital categories.
Internal Service funds are described in governmental accounting literature
as “ proprietary funds.” Special Revenue funds ( which include the Cost
Center funds) and Capital funds are grouped in the literature with the General
Fund and debt service funds and are described as “ governmental funds.”
The distinction between how the budgeted resources are accounted for in
proprietary funds as compared to governmental funds is discussed in the
“ Basis of Budgetary Accounting” located in the Policies and Practices
section of the document. A description and financial summary is provided
for each category of Other Funds within the budget.
Capital Budget Summary
The Capital Improvement Program/ Integrated Capital Assets Plan ( CIP/
ICAP) is adopted biannually and includes appropriations for projects for
Fiscal Years 2005/ 06 and 2006/ 07. Selected excerpts from the Plan are
City of Fremont 2006/ 07 Adopted Operating Budget
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Guide to the Document
included with the operating budget to present a comprehensive picture of
all the funds of the City and to reflect fund transfers approved between
other operating funds and capital funds. This section contains a description
of the CIP/ ICAP funds, a summary of approved expenditures by program
category, and highlights of key projects for the current fiscal year.
Department Budgets
The majority of the budget document presents information on departmental
budgets. Each departmental section provides the following information:
• Department Mission Statement
• Description of Responsibilities and Services - The purpose of this
paragraph is to give the reader an understanding of the scope and
breadth of each service area’s ongoing functions and responsibilities.
• Service Objectives - A list of yearly department objectives aligned
with the Council’s goals.
• Sources of Funding - This information is in graphic form and illustrates
the funds from which departments receive financial resources.
Interfund transfers ( to the General Fund) cover administrative
department costs that are not funded by the General Fund. This
contribution is shown on the charts as “ overhead charges to other funds.”
• Expenditure Summary - This table provides the salary and benefits,
operating, and capital costs associated with the department for the fiscal
year. It also provides historical information and trends of previous
funding levels.
• Major Budget Changes - A description of the major budget changes is
included that compares the previous year’s budget with that for the
current year.
• Staffing - A historical staffing graph shows the level of staffing for
each area. Trends are easily identified. In addition, an organization
chart displays individual positions and titles.
Departments comprised of mulitiple, discrete, service areas also present a
table summarizing their activities by those major service areas.
Staffing
This section contains a summary of authorized positions by department and
provides perspective on workforce trends.
Policies
This section details the City’s budget and financial policies.
Resolutions
This section contains resolutions approving and adopting the City budget,
the Redevelopment Agency budget, and the appropriation limit for the fiscal
year.
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Budget Overview
The City of Fremont, as seen from the Ohlone Wilderness Trail at the
base of Mission Peak
Honorable Mayor and Members of the City Council:
Executive Summary
Like many cities in California, the City of Fremont continues to face an
uncertain economic future. Years of State takeaways of City dollars, coupled
with a serious recession in the early years of this decade, have taken their
toll on the City’s finances. With the $ 130.5 million FY 2006/ 07 budget,
expenditures will once again exceed revenues, no fund balance will remain
at the end of FY 2006/ 07, and we are projecting some use of the Budget
Uncertainty Reserve. In addition, this budget does nothing to address the
City’s significant service deficit.
The City has been fiscally responsible during this multi- year budget crisis
by reducing spending throughout the organization and by focusing on
attracting and retaining retail in order to increase revenue. Unfortunately,
this fiscal responsibility has come at great cost to the City organization and
to the larger Fremont community, which relies on the City to provide a
broad range of services at excellent levels.
Several years ago, the City cut costs by more than 25% and cut staff by
more than 20%, or more than 220 positions. The consequences of these
reductions have been severe. We cut our crime prevention efforts, dropped
our response to low- priority police calls, and reduced the Police Department’s
traffic unit. We closed a fire station on the west side of town and
implemented rotating station closures at four other stations in order to reduce
overtime costs. We deferred repairing our streets, thereby increasing our
pothole problem and, unfortunately, ensuring that we will have to perform
more expensive maintenance in the future. We eliminated all support for
supplemental hours at the four Fremont libraries, and we eliminated park
events like the summer concert series. We also had to postpone the
construction of a new senior center, even though the number of seniors in
Fremont is increasing dramatically.
City of Fremont 2006/ 07 Adopted Operating Budget
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Budget Overview
It’s clear that the City cannot continue on this path. Although revenues are
increasing in some areas, and the City continues to constrain its spending,
the FY 2006/ 07 budget does nothing to restore the health of the community.
In fact, our projections show that we will still outspend our revenues by
$ 1.6 million in the 2006/ 07 fiscal year, preventing us from restoring much-needed
services in the police, fire, and maintenance areas.
For that reason, we are continuing our ongoing dialogue with the community
about what the right service levels are, and how we can achieve those
levels now and in the future.
Community Outreach and the Budget
The City of Fremont incorporated just over 50 years ago, on January 23,
1956. The vote to incorporate occurred after months of hard work by a
group of engaged and involved community members. These leaders
recognized that five small towns could never be as strong as one larger,
incorporated city, and they worked tirelessly to ensure the City’s future
success.
That spirit of civic engagement lives on in Fremont, a city where people
volunteer their time in so many ways to help their community. A look at
today’s Fremont shows thriving service clubs, business associations, ethnic
and cultural organizations, homeowners associations, youth athletic leagues,
historical societies, PTAs, arts organizations, and more.
In fact, Fremont residents and business members are so interested in helping
this community that a group of them stepped forward over a year ago to
organize and plan Fremont’s 50th anniversary when the City was financially
unable to do so. The organization they formed, Celebrate Fremont, hosted
a successful gala and open house in January 2006, and they are planning a
months- long series of events, culminating in a community- wide celebration
of Fremont’s anniversary in September 2006.
Many of these dedicated community members are also involved in helping
with the City’s outreach efforts regarding the budget and City services. In
early 2005, after the City’s utility users tax failed to garner a majority of
votes in November 2004, City staff began a comprehensive community
outreach program designed to hear from Fremont residents and business
community members about their priorities, needs, and ideas for addressing
the City’s fiscal and community service challenges. As a first step, the City
conducted a poll of residents in April 2005. The goal of the survey was to
assess public attitudes toward a variety of issues the City is currently facing
with regard to services and finances. The main finding of the survey was
that Fremont residents and business community members want to ensure
that the City maintains a broad range of services at excellent levels. More
specifically:
• A majority of residents see “ some need” for additional funding for
public safety, libraries, and street and road maintenance in Fremont.
City of Fremont 2006/ 07 Adopted Operating Budget
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Budget Overview
Police Department buildings as seen from Central Park
• Three quarters are at least “ very concerned” that the City receives far
less revenue than surrounding cities.
• The highest priorities, should additional funding become available, include
fixing streets and repairing potholes, preventing the elimination of
programs that work with police and schools to help keep at- risk kids
from getting into trouble, providing follow- up to cases of domestic
violence, and hiring, training, and retaining additional police officers
and firefighters.
With the survey results in hand, we formed an ad- hoc Community Task
Force, comprised of Fremont residents and business owners, to help us
develop a fiscally responsible plan for the City. The Task Force had several
purposes: help facilitate communication with residents and groups within
the community, share information about the City’s priorities, and provide
feedback on how to address the City’s needs and priorities. At the first
meeting, we discussed with the Task Force members the idea that a revenue
measure might be considered at the end of the process. However, we
assured them that we were not presupposing an end result of our outreach
efforts, but rather identifying possible outcomes.
In October, several members of the Community Task Force increased their
commitment even further by forming a Speakers Bureau. Members of the
Speakers Bureau, accompanied by City staff who helped answer technical
questions, met with a wide array of diverse community groups and
stakeholders, with the goal of assessing neighborhood priorities and evaluating
community feedback. Those meetings, plus an interactive mailer we sent
out to the community asking people to prioritize City services, a similar
form on our website, and articles in the Citywide newsletter, generated
more than 3,000 responses from members of the Fremont community.
City of Fremont 2006/ 07 Adopted Operating Budget
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Budget Overview
At the five Community Task Force meetings held so far, we discussed the
feedback Task Force members were hearing at the Speakers Bureau
presentations and out in the community. We also shared with them some of
the consequences of the budget reductions we’ve had to make over the
years.
In the Police Department, for example, we’ve had to reduce the number of
personnel from an authorized high of 337.75 in FY 2002/ 03 to our current
authorized level in FY 2005/ 06 of 294.00. For FY 2006/ 07, the authorized
staffing level remains at 294.00, with 188 sworn police officers and 106
non- sworn personnel. This staffing level gives us a ratio of .89 officers per
1,000 residents, which is the lowest per capita staffing level of any city in
the area and considerably lower than the Alameda County average of 1.37
officers per 1,000 residents.
Unfortunately, along with the reductions in personnel, we’ve also seen an
increase in crime rates. In the last five years, crime rates have risen, with
violent crime up 32% and auto thefts up 50%. According to a nationally
recognized annual crime report by Morgan Quitno Press, Fremont was the
23rd safest city in the year 2000 among cities with a population above 75,000.
The latest report revealed that Fremont has slid to 59th in the rankings.
While a higher staffing level would not solve all of our crime problems, we
know that policing can be more proactive with more officers, and that more
proactive police work is one of the keys to preventing crime.
The budget reductions in the Fire Department, coupled with more calls for
service, are translating into slower response times to fire and medical
emergencies. The Fire Department’s goal is to respond to almost all calls
within 5 ½ minutes. In the years since the City closed a fire station and
implemented rotating station closures, the Fire Department has not been
able to achieve this standard.
In fact, since 2003, the demand for service has increased ( call volume is up
10% since 2003) and response time has continued to slip. In 2003, the Fire
Department responded to 90% of all calls within 6 ½ minutes, while in
2004, the Department responded to 90% of all calls within 7 ½ minutes. By
2005, the response time for 90% of all calls had increased to 8 ¾ minutes.
The Fire Department’s response time is also hindered by Fremont’s large
land area relative to its number of fire stations. Fremont has 10 fire stations
covering 92 square miles, and on any given day, one of them may be closed
as a money- saving measure. For comparison, the City of Santa Clara also
has 10 fire stations, but only 19 square miles to cover.
Lack of maintenance of the City’s streets, trees, parks, and buildings is
perhaps the most visible consequence of the City’s cutbacks over the last
several years. While people may not notice reductions in the Police and
Fire Departments unless they experience a crime, fire, or medical emergency,
everyone travels on the City’s roads, and everyone can feel the result of
budget reductions. The most obvious signs of deteriorating streets are the
numerous potholes the City is unable to fill, and the rougher ride on many of
City of Fremont 2006/ 07 Adopted Operating Budget
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Budget Overview
Irvington District
the streets. The State restored Proposition 42 ( sales tax on the gas tax)
funding for FY 2005/ 06 after several years of takeaways, but the City is
still unable to keep up with its street maintenance needs. Even with the
additional $ 879,000 in Proposition 42 funding for FY 2005/ 06, the City faces
an annual gap in the pavement maintenance budget of about $ 5 million.
The City also maintains 46,000 street trees. Several years ago, crews
were able to trim trees on a seven- year cycle. The City now has fewer
maintenance staff, and they must focus on critical repairs first. For this
reason, the tree- trimming cycle has stretched from seven years to 20 years,
which will lead to more risks of fallen tree limbs and poorer appearance.
The City also has aging park equipment. Since there is not enough staff to
keep up with park equipment and playground repairs, staff often has to
remove equipment to prevent safety risks, when they otherwise would repair
or replace it.
Unless more money is invested in maintaining the community’s physical
infrastructure, these assets will continue to deteriorate, and they will be
much more expensive to repair in the future.
Pursuing Fiscal Health
The Community Task Force will meet at least one more time; at that meeting,
they will discuss whether they believe the City should move forward with a
finance measure in November 2006. Staff has still not made any
recommendations to the City Council about whether or not to proceed with
a revenue measure or continue with the outreach process for another year
or longer.
In the meanwhile, the City is pursuing a number of economic development
opportunities. While any positive changes in the economy will not be great
enough to overcome the very large gap in services we face, an improving
City of Fremont 2006/ 07 Adopted Operating Budget
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Budget Overview
revenue picture will keep us from losing further ground. For that reason,
we are continuing to move forward on a number of revenue- generating
fronts.
Capitol Avenue/ Mixed- Use Retail Project: The Capitol Avenue project
is an exciting, high- end, retail- focused development that will be a catalyst
project for further development of the City’s Downtown. The project will
include the extension of Capitol Avenue to Fremont Boulevard and
encompasses both portions of Fremont Plaza and the City’s seven- acre
property adjacent to State Street.
The City has partnered with Tribeca Company, the owners of Fremont
Plaza, and Blake Hunt Ventures to develop approximately 200,000 square
feet of ground- level shops and restaurants and several hundred residential
units located above the retail and parking structures. The retail component
will be focused on providing a Main Street- style, pedestrian- friendly upscale
retail environment with a large public plaza in the middle of Capitol Avenue,
providing a focal point for a diverse array of programming and public events.
In March, the City Council reviewed a scale model of the Capitol Avenue
project and expressed excitement about the prospects for the project. Staff
will be engaging in formal development agreement negotiations with the
co- developers over the next six to nine months.
Pacific Commons: Pacific Commons is a 700,000- square foot retail center
located at I- 880 and Auto Mall Parkway. The first stores at Pacific
Commons opened in October 2004, and the center has thrived ever since,
bringing in additional sales tax dollars. When the center is completely built
out, we expect to receive approximately $ 1 million of additional sales tax
revenue each year. Some of the businesses at Pacific Commons include
Costco, Lowe’s, Circuit City, Bassett Furniture, Kohl’s, Old Navy, and In-
N- Out. Both Claim Jumper and PF Chang’s China Bistro will be opening
restaurants there within the next year.
The nearby Fremont Auto Mall has also proven to be a success. During
the past year, a new Land Rover/ Volvo/ Jaguar dealership opened and
construction began on a new expanded site for the existing Lexus dealership.
The Toyota dealership is also undergoing a major expansion. Finally, within
the upcoming year, an additional new dealership will be coming to the Auto
Mall where the existing Lexus dealership is now.
Biotech: Fremont’s life science community has also grown in the past
year. Four new firms ( Aryx Therapeutics, RITA Medical Systems,
AngioScore, and Dynatherm) located in Fremont, while Genitope leased
220,000 square feet of space in Ardenwood for its headquarters and new
manufacturing facility. The company expects to open in August 2006. In
addition, construction is slated to begin later this year on a new 118,000
square- foot biotech facility in Ardenwood. These new businesses strengthen
and diversify the local business base and will eventually add over 500 new
jobs to Fremont.
City of Fremont 2006/ 07 Adopted Operating Budget
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Budget Overview
Mission Peak with a rare dusting of snow, as seen from one of the
trails to the top.
Major League Baseball: In 2005, the City first began hearing rumors that
the Oakland Athletics ( the A’s) might be interested in moving out of Oakland.
The A’s owner, Lew Wolff, was then in negotiations with the City of Oakland
regarding relocating to a new baseball stadium. Mr. Wolff wants to build
not only a new stadium, but also a baseball village that would include
residential units and retail. With the City of Oakland potentially unable to
find a suitable location for this baseball village, Mr. Wolff began looking
elsewhere in Alameda County for a site. Mr. Wolff contacted the City and
began discussions with private landowners about the possibility of relocating
to Fremont. While the A’s may not make any decisions about relocating
until the end of the baseball season in October, this is an exciting opportunity
for Fremont. Staff will be working diligently with representatives of the A’s
over the next several months to ensure that any new baseball village brings
in adequate revenues to support any increased costs to the City.
Redevelopment: There are a number of exciting redevelopment projects
underway. All of these projects will help revitalize the Redevelopment
Project Areas and bring new revenue into Fremont.
Centerville: The largest investment underway in the Centerville
Redevelopment Project Area is the Centerville Market Place project.
Located on a 6.6- acre site along Fremont Boulevard near Thornton Avenue,
the Centerville Market Place is a public/ private partnership between Charter
Development and the Redevelopment Agency. Once completed, the mixed-use
project will include approximately 58,000 square feet of retail space
along Fremont Boulevard, a new street connecting Fremont Boulevard to
Post Street, and 110 for- sale townhome- style condominiums located above
the retail shops.
The Redevelopment Agency completed the demolition of all buildings and
site remediation last year. The groundbreaking is scheduled for 2006, and
the grand opening will occur in late 2007 or early 2008. Once open, the
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Budget Overview
Centerville Market Place is expected to set a new development standard
for Centerville and serve as an economic catalyst for the area.
Irvington: The Washington Boulevard and Paseo Padre Parkway Grade
Separation is the largest redevelopment project in the Irvington district.
This $ 96 million project, which will build an overpass on Washington
Boulevard and an underpass on Paseo Padre Parkway to separate car,
bicycle, and pedestrian traffic from railroad crossings, is described in detail
in the Capital Projects section of this overview.
The Bay Street Streetscape and Parking Project is one of the cornerstones
for Irvington’s revitalization. The project was developed with the intent of
transforming the street environment for this three- block stretch of Bay
Street to support existing, and create new, commercial and residential mixed
uses, as well as other public and private investments in and around the Five
Corners in Irvington. Since its approval in 2004, project implementation
has faced some challenges. As a result, modifications that will revise the
plan for public parking, reduce the right- of- way requirements for street
improvements, and extend street improvements to include Papazian Way
and Trimboli Way are being considered. Staff has engaged the community
in a discussion about the proposed modifications and will be reporting back
to Council in June. If the revised project is approved, construction could
begin following utility undergrounding by PG& E, scheduled for the summer
of 2007.
In addition, the Redevelopment Agency is considering ways to work with
the property owners of the Monument Center Shopping Center properties
located on Fremont Boulevard at the Five Corners intersection. In early
2003, as a result of the State budget crisis and the impending shift of
redevelopment funds to the State, the Redevelopment Agency put plans for
Monument Center on hold. The project will be reactivated next year. During
2006/ 2007, staff will be working with the property owners to assess their
interest in development opportunities for the site.
In the housing arena, the Redevelopment Agency provided assistance to
the now- completed Bridgeway Expansion project, 18 transitional and
permanent homes on Bay Street for very low- income residents. The Agency
is now working with Bridge Housing Corporation, the developer for the
Irvington Family Apartments. Located on the former Tri- City Patio World
site, the Irvington Family Apartments will provide 100 affordable apartments
for families and individuals. Construction began in December 2005, and
completion is expected in the summer of 2007. The Agency is also assisting
the Lincoln Avenue Apartments, which will provide housing for 11 families
with developmentally disabled members. Completion is expected in the
summer of 2006.
Niles: The 138- acre Niles Redevelopment Project Area is located at the
western edge of Niles Canyon, near the intersection of Niles and Mission
Boulevards. For the past several years, Redevelopment Agency staff has
been working with the community on the development of the Niles Town
Plaza.
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Budget Overview
Fremont from the air, with Mission Peak and San Francisco Bay
Located on the north side of Niles Boulevard on an approximately two-acre
portion of the former UP Property, at H and I Streets, the $ 3.9 million
Town Plaza will include landscape improvements, a water feature, and an
amphitheater and stage area. Once constructed, the plaza will act as an
anchor for what could ultimately be a two- story Main Street- style
development that will turn Niles Boulevard into a more typical two- sided
commercial street. Environmental remediation of the property is scheduled
to occur later this year, and groundbreaking on the Town Plaza is slated for
summer 2007.
Capital Projects: Despite the problems in the City’s General Fund, we
are continuing to work on a variety of major capital projects. These projects
can proceed because they do not rely on the City’s General Fund. Rather,
their funding comes from such sources as redevelopment, traffic impact
fees, State and regional sources, and the Recreation Cost Center’s operating
reserve.
Grade Separation Project: The $ 96 million Grade Separation Project in
the Irvington District is the largest public works project undertaken in the
City’s history. The project includes building an overpass on Washington
Boulevard between Bruce Drive and Roberts Avenue and an underpass on
Paseo Padre Parkway between Shadowbrooke Common Road and
Hancock Drive to separate car, bicycle, and pedestrian traffic from railroad
crossings. The project also includes the relocation of about one and a half
miles of the active Union Pacific ( UP) railroad tracks up to 500 feet to the
east of where they are now in the area between Paseo Padre Parkway
and Washington Boulevard.
The Grade Separation Project will benefit Fremont in a number of ways.
First, it will facilitate the future BART extension to Warm Springs and San
Jose by allowing the BART trains to travel at grade once they emerge from
underneath Central Park and Lake Elizabeth. Keeping the trains at grade
is both less expensive for BART and less disruptive for residents and
businesses near the BART tracks. Second, the project will improve safety,
City of Fremont 2006/ 07 Adopted Operating Budget
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Budget Overview
reduce traffic delays, and eliminate the need for freight trains to sound
their horns when approaching and crossing Washington Boulevard, High
Street, Main Street and Paseo Padre Parkway ( the train crossings at High
and Main Streets will be eliminated by the relocation of the UP tracks). In
turn, eliminating traffic backups at train crossings will help reduce cut-through
traffic on neighborhood streets and improve safety in the area by
separating vehicles from the railroad tracks.
The Grade Separation Project was originally projected to cost approximately
$ 75 million. However, escalating construction costs have increased the
price tag to about $ 96 million. The City has committed $ 37.7 million in
redevelopment funds and traffic impact fees to the project and has secured
about $ 37 million in additional funding from the State and regional sources
like the Alameda County Congestion Management Agency ( CMA), bridge
tolls, and the County’s Measure B half- cent sales tax. Because this project
is the first, necessary step in bringing BART to Warm Springs and San
Jose, City staff spent much of the spring meeting with officials from the
Metropolitan Transportation Commission, BART, the CMA, the Silicon
Valley Leadership Group, and the Santa Clara Valley Transportation
Authority to discuss alternate funding strategies to make up the anticipated
$ 21.1 million funding shortfall. At this time, it appears likely that full funding
will be secured by the time the project is advertised for construction bids in
the fall of 2006.
Family Water Play Facility: The City is building a Family Water Play
Facility at the former Puerto Penasco Swim Lagoon in Central Park. The
facility will include a lazy river, water slides, a pool, play areas for young
people, picnic areas, a food concession, and a science lab for environmental
education programs.
The total estimated cost of the project is $ 10 million. The majority of the
funding will come from the Recreation Operating Improvement Reserves,
State Proposition monies, and Park Development funds. In addition, the
Fremont Bank Foundation has announced its intent to provide $ 1 million for
the project, while the Candle Lighters are donating $ 75,000. No General
Fund monies are being used in this project. Once open, the Water Play
Facility will be a financially self- sustaining operation that will cover its own
costs.
Conclusion
Fifty years after the City’s incorporation, we now find ourselves in a difficult
position. Our residents and business community members want the City to
provide a broad range of services at excellent levels, but we lack sufficient
funds to carry out their wishes. We will continue to work in partnership
with the community to determine what the appropriate services are for
Fremont and how to pay for those services. Together, we will develop a
fiscally responsible plan for Fremont.
Fred Diaz
City Manager
City of Fremont 2006/ 07 Adopted Operating Budget
17
Fremont Community
Commissions City Council Boards
City Attorney City Manager
City of Fremont Organization Chart
Fiscal Year 2006/ 07
Deputy
City Manager
Parks &
Recreation
Director
Deputy
City Manager
City Clerk
HumanResources
Director
Chief Information
Technology Officer
Transportation &
Operations
Director
Environmental
Services
Manager
Maintenance
Manager
Economic
Development
Director
Finance Director
Fire Chief
Human Services
Director
Police Chief
Community
Development
Director
Building &
Safety
Manager
City Engineer
Housing &
Redevelopment
Director
Planning
Director
18
The City of Fremont, fifty years ago ( 1956)
Niles
Irvington
Centerville
Mission San Jose
Warm Springs
19
History
Fremont’s rich heritage can be traced to the Ohlones, natives of the land,
and to the Spanish priests who established Mission San Jose, the first Spanish
mission located inland. Since those early days, Fremont’s rich soil, central
location, and excellent climate have continued to attract newcomers to this
area. In the mid- 1840s, John C. Frémont mapped a trail through Mission
Pass to provide access for American settlers into the southeastern San
Francisco Bay Area. During the Gold Rush era, the Mission area attracted
miners headed for the California gold fields. Governor Leland Stanford
acquired land in the Warm Springs area, where he planted vineyards and
built one of the first wineries in the state. The Niles district made history
when the last tracks needed to connect the transcontinental railroad were
laid there. Further acclaim came to Niles when Charlie Chaplin filmed
“ The Tramp” at the Essanay Movie Studio there. In 1853, Washington
Township was established and included the communities of Mission San
Jose, Centerville, Niles, Irvington, and Warm Springs. On January 23, 1956,
these communities joined to form the City of Fremont.
Quality of Life
Fremont, located in southern Alameda County,
stretches from the San Francisco Bay to the
top of Mission Peak above historic Mission
San Jose in the east. With a population of
over 210,445, Fremont is the fourth largest city
in the San Francisco Bay Area and ranks 91st
among the most populous cities in the nation
according to the California State Department
of Finance. Fremont is approximately 92
square miles in size and includes the 450- acre
Central Park and 80- acre Lake Elizabeth,
along with 51 other parks, five community
centers, and extensive sports facilities.
Fremont is also home to the Don Edwards
San Francisco Bay National Wildlife Refuge,
adjacent to Coyote Hills Regional Park.
Fremont enjoys a high rate of home ownership,
a low crime rate, and a quality of life that is
considered to be one of the best in the United
States. For example, Fremont was rated as
the best place in which to raise healthy children in the nation, and Men’s
Health magazine rated Fremont # 1 in the nation for men’s health. Fremont
residents can expect a first- rate menu of local services, including a highly
rated public education system, excellent public safety program, and
recreation, park, and other leisure activities. In addition to beautiful parks
and extensive recreational facilities, Fremont is easily accessible to three
international airports, several major educational institutions, the Bay Area
Rapid Transit system, and professional sports and cultural opportunities.
Fremont is also home to Washington Hospital, a community asset for over
50 years.
City of Fremont
Profile
City of Fremont 2006/ 07 Adopted Operating Budget
20
Profile
Government
Incorporated January 23, 1956
Fremont is a General Law Council/
Manager City governed by a five-member
City Council with a directly
elected Mayor, all elected at large.
Number of directly elected Mayors
( since 1978): 5
Number of City Managers since
Incorporation: 7
Full- time Employees
FY 2006/ 071
Community Development..... 106.42
Economic Development ........... 4.64
Fire………………................. 153.00
General Government…...…. 87.90
Human Services...….......….. 43.97
Transportation and Operations.. 112.90
Police………………….....… 294.00
Parks and Recreation……........ 67.35
Housing and Redevelopement.... 13.99
Total……………............... 884.17
Demographics
Land Area: 92 square miles
Population
1956…………...…………… 22,443
1960………….………..…… 43,634
1970………….….……..…. 102,321
1980…………...………….. 127,454
1990……………...……….. 173,116
2000………....……………. 203,413
20062 ................................... 210,445
Climate3
Average Temperature: 59oF ( 15oC)
Avg. Annual Precipitation: 13.6”
Level of Educational Attainment
of people 25 years and older4
College Degree……………… 43%
Associate Degree............…… 8%
Some College, no Degree…… 20%
High School Graduate……… 17%
Grades 9- 12 ( No Diploma)...… 7%
Less than 9th Grade………….. 5%
Median Age4: 35
Mean Household Income
( 2005 projection) 5: $ 100,500
Racial Composition4
Asian..........................……… 37%
African- American………….... 3%
White…...................……... 48%
O t h e r … . . . . . . . . . . . . . . . . . . . … … . . 6 %
Two or more....................……... 6%
( Hispanic/ Latino may be of any race)
Business
Major Employers, listed in order of
number of employees6
New United Motor Mfg. ( NUMMI)
Lam Research Corporation
MMC Technology
Office Depot
Solectron California Corp./ Fine Pitch
Sysco Food Services
Western Digital
Kaiser Permanente Medical Group
Sanmina- SCI
Scios Inc.
Zomax Incorporated
Abgenix Inc.
Therma Wave Inc.
Quanta Computer
Mervyn’s Distribution Center
Spectra Laboratories Inc.
Fry’s Electronics Inc.
Boston Scientific/ Target
Walters & Wolf Glass Co.
Elo TouchSystems, Inc.
Distribution of jobs by major
employment sectors ( 2005 projection) 5
Agriculture/ Nat. Resources……... 0.1%
Manufac./ Wholesale/ Trans.……. 40.9%
Retail………………………..... 9.9%
Financial/ Prof. Service................. 16.5%
Health/ Ed./ Recreation.…………. 22.6%
Other……………............… 10.0%
Total Jobs…………............… 96,530
City of Fremont 2006/ 07 Adopted Operating Budget
21
Profile
Services by Other
Governmental Units
Education: Fremont Unified School
District and Fremont- Newark
Community College District
Flood: Alameda County Flood
Control and Water Conservation
District
Parks: East Bay Regional Park
District
Public Transportation: Bay Area
Rapid Transit District, Alameda-
Contra Costa Transit District, ACE
Train, and Capitol Corridor Train
Sewer: Union Sanitary District
Gas and Electricity: Pacific Gas and
Electric
Water: Alameda County Water
District
Education
Fremont Unified School District
( FUSD) has 29 elementary
schools, 5 junior high schools, 5
high schools and a continuation
school.
FUSD Average SAT Score7: 1121
Percentage of FUSD graduates
attending8:
University of California: 19.4%
California State University: 13.6%
Ohlone College is a public, two-year,
open- admission community
college with an average
enrollment of 11,551 students per
semester. 9
Notes
1 FY 2006/ 07 Adopted Operating Budget, City of Fremont
2 California State Department of Finance
3 National Weather Service
4 U. S. Census 2000
5 Association of Bay Area Governments ( ABAG)
6 City of Fremont, Economic Development Department
7 Fremont Unified School District
8California Postsecondary Education Commission
9Ohlone College, Office of College Relations
Community Services
Family Resource Center: 1
Parks: 52
Senior Center: 1
Community Centers: 5
Fire Stations: 10
City of Fremont 2006/ 07 Adopted Operating Budget
22
23
The “ Summary of All Funds” schedule on the following page groups the
City’s funds into five categories:
! General Fund
! Cost Center/ Internal Service
! Special Revenue
! Redevelopment
! Capital
The first three categories include the City’s operating funds, and the last
two are special purpose fund categories. Funding for most of the City
operations and most of its services comes from the first three fund categories.
The Fremont Redevelopment Agency’s budget is adopted separately by the
City Council when it sits as the governing board of the Redevelopment
Agency. The budget for Capital funds is reviewed and adopted by the City
Council as part of the Capital Improvement Program/ Integrated Capital
Assets Plan ( CIP/ ICAP). The FY 2006/ 07 maintenance appropriations
were adopted when the City Council adopted the FY 2005/ 06 - 2009/ 10
CIP/ ICAP.
The “ Summary of All Funds” schedule consolidates all funds Citywide and
presents the total available resources and total use of resources, including
beginning fund balances, revenues, expenditures, “ transfers in,” and “ transfers
out.” This consolidation is achieved by eliminating all transfers between
funds that are within the same fund category and all internal service fund
charge transfers. Such eliminations are similar to those made to produce
the City’s government- wide financial statements, as mandated by GASB
34. These eliminations avoid the double counting that would otherwise occur
if these transactions were shown as either additional transfers or as additional
revenues and expenditures. Therefore, the “ Total Expenditures” and “ Total
Revenues” lines for all funds present the true budgeted expenditures and
revenues expected to be received and spent by the entire organization.
Please refer to the General Fund section and the Other Funds section
of this document for more information.
All City Funds
Schedule
City of Fremont 2006/ 07 Adopted Operating Budget
24
All City Funds Schedule
Note: Some internal charges between funds are classified as either transfers
or expenditures to clarify departmental budget resources and appropriations.
This results in minor differences between the individual departmental budgets
and amounts shown in the Summary of All Funds schedule above.
Summary of All Funds
Total Cost Center/ Special Total
General Internal Revenue RDA Capital All
( Thousands of Dollars) Fund Service Funds Funds Funds Funds Funds
Fund Balance - 6/ 30/ 06 ( est.) $ 33,551 $ 9 ,681 $ 18,144 $ 7 8,017 $ 18,934 $ 158,327
Revenues
Intergovernmental:
Property Taxes 41,325 - - 2 8,900 - 70,225
In- lieu VLF 13,798 - - - - 13,798
In- lieu Sales Taxes 8,084 - - - - 8,084
Sales & Use Taxes 25,418 - 761 - - 26,179
Vehicle License Fees 1,502 - - - - 1,502
Other Intergovernmental 646 9 9 5,678 - 5,485 11,908
Business Taxes 6,941 - - - - 6,941
Hotel/ Motel Taxes 2,486 - - - - 2,486
Property Transfer Taxes 2,006 - - - - 2,006
Franchise Fees 7,862 - - - - 7,862
Charges for Services 3,217 1 9,347 8,203 - 2,484 33,251
Fines 3,235 - - - - 3,235
Investment Earnings 2,783 2 92 13 1 ,461 1,367 5,916
Paramedic Fees 1,065 - - - - 1,065
Other Revenues 1,050 6 68 1,180 8 00 2,319 6,017
Total Revenues 121,418 2 0,406 15,835 3 1,161 11,655 200,475
Total Transfers In 7,528 6 ,096 182 - 35,412 49,218
Total Available Resources 162,497 3 6,183 34,161 1 09,178 66,001 408,020
Expenditures
General Government 12,061 - - - - 12,061
Police 48,575 - 1,093 - - 49,668
Fire 27,760 - 304 - - 28,064
Transportation and Operations - 1 ,590 7,869 - 18,042 27,501
Community Development:
Planning - 3 ,593 - - - 3,593
Building & Safety - 5 ,162 - - - 5,162
Engineering - 5 ,948 - - - 5,948
Community Preservation 668 - - - - 668
Housing and Redevelopment - - 385 5 4,402 - 54,787
Human Services 3,150 7 43 6,451 - - 10,344
Parks and Recreation - 5 ,788 - - 4,522 10,310
Non- departmental 2,555 ( 658) - - 5,108 7,005
Less: Citywide Savings ( 1,000) ( 1,000)
Debt costs 150 - 641 7 ,505 7,813 16,109
Total Expenditures 93,919 2 2,166 16,743 6 1,907 35,485 230,220
Total Transfers Out 35,350 6 ,979 813 2 50 5,826 49,218
Total Use of Resources 129,269 2 9,145 17,556 6 2,157 41,311 279,438
Fund Balance - 6/ 30/ 07 ( est.) $ 33,228 $ 7 ,038 $ 16,605 $ 4 7,021 $ 24,690 $ 128,582
25
Citywide Position
Changes
Overview
The total authorized permanent staffing level for the FY 2006/ 07 budget is
virtually unchanged from the FY 2005/ 06 level. Cautious budget planning
prompted by continuing economic uncertainty prevents the City from
restoring any of the 148.30 permanent positions eliminated since FY 2002/
03. Staffing levels for the most basic services — Police, Fire, and
Maintenance — remain at their lowest level in at least 17 years when
viewed in relation to Fremont’s population.
The authorized level of 884.17 full- time equivalent positions ( FTEs) is 0.43
FTE lower than the FY 2005/ 06 level of 884.60. The reorganization of the
Development and Environmental Services Department into two departments
— the Community Development Department and the Department of
Transportation and Operations — is the most significant organizational change
for FY 2006/ 07. The reorganization was accomplished by restructuring or
reclassifying several existing positions, without adding any new staff.
The decrease in net FTE positions is primarily attributable to the elimination
of a vacant Management Analyst position in the City Manager’s Office
and offsetting miscellaneous adjustments of existing positions. Additional
information on departmental staffing, along with organizational charts, may
be found in the departmental budget section of this document. Additional
discussion of citywide details may be found in the Staffing section of this
document.
Note: Historical staffing information reflects the current organizational structure.
Positions previously displayed in departments that were eliminated as part of the
FY 2006/ 07 reorganization ( Maintenance, and Development and Environmental
Services) have been redistributed to new departments ( Community Development,
Transportation and Operations, and Parks and Recreation) with the same
adjustments made to historical data to assist the reader with comparisons.
2001/ 02 2002/ 03 2003/ 04 2004/ 05 2005/ 06 2006/ 07
PUBLIC SAFETY
Fire 176.20 176.00 157.60 153.00 153.00 153.00
Police 337.75 337.75 292.90 299.10 294.00 294.00
TOTAL 513.95 513.75 450.50 452.10 447.00 447.00
OTHER COMMUNITY SERVICES
Community Development 128.70 129.60 103.32 102.90 105.10 106.42
Economic Development 6.00 4.70 3.64 4.75 4.64 4.64
Human Services 40.95 44.95 40.57 40.67 43.97 43.97
Transportation & Operations 129.10 137.10 115.60 116.15 113.40 112.90
Parks and Recreation 72.60 74.25 70.10 68.85 67.35 67.35
Housing and Redevelopment 16.05 17.35 13.04 14.68 14.54 13.99
TOTAL 393.40 407.95 346.27 348.00 349.00 349.27
ADMINISTRATIVE SYSTEMS
City Manager's Office 4.00 4.00 3.00 3.00 3.00 2.40
Administrative Systems Office 12.00 11.10 5.50 6.50 5.30 5.30
City Attorney 13.00 13.00 12.00 11.00 10.75 10.75
City Clerk 9.00 10.50 7.50 7.40 6.40 6.30
Finance 29.65 30.05 25.40 26.40 25.75 25.75
Information Systems 18.00 21.00 20.40 20.40 20.40 20.40
Human Resources 21.00 21.00 17.00 17.50 17.00 17.00
TOTAL 106.65 110.65 90.80 92.20 88.60 87.90
CITYWIDE TOTAL 1014.00 1032.35 887.57 892.30 884.60 884.17
City of Fremont 2006/ 07 Adopted Operating Budget
26
27
Cities have primarily three choices in financing their operations and funding
public facilities: pay- as- you- go, debt financing, and public- private ventures.
The City has adopted a Long- Term Capital Debt Policy that sets the
guidelines for issuing debt and provides guidance in the timing and structuring
of long- term debt commitments. The City will consider the issuance of
long- term debt obligations only under the conditions outlined in the policy
displayed in the Policies section of this document. Present and future planned
debt payments affecting the operating budget are detailed on the “ transfers
summary” located in the General Fund section of this budget.
The charts below summarize the City’s existing long- term debt and future
debt obligations related to that existing debt.
City Debt
Summary
An n u a l D e b t S e rv ic e R e q u irem e n ts
C ity ' s C ert ific ates
City ' s C ert ific ates of P art ic ipat ion - General
of P art ic ipat ion - S ou rc e o f P aym ent Obliga tion B onds
S ourc e of P aym ent Frem ont Res ourc e E lec t ion o f 2003 Tax A lloc at ion
G eneral F und Center S eries B B onds
FY 2006 / 07 $ 7 ,812 ,930 $ 641,343 $ 1 ,765,753 $ 7 ,504,521
FY 2007 / 08 7 ,837 ,260 642,993 1 ,761,403 7 ,498,856
FY 2008 / 09 7 ,936 ,496 652,008 1 ,756,353 7 ,498,596
FY 2009 / 10 7 ,913 ,912 656,465 2 ,251,678 7 ,496,286
FY 2010 / 11 7 ,920 ,692 660,397 4 ,737,153 7 ,487,881
The reaft er 132,890 ,373 1 2,965,907 50,902,898 24,652,641
T o ta l P rin cip a l &
I n te re st 172,311 ,663 1 6,219,113 63,175,235 62,138,782
Les s Int eres t ( 48,696 ,663) ( 5,129,113) ( 28,545,235) ( 8,773,782)
T o ta l P rin cip a l $ 123,615 ,000 $ 11,090,000 $ 34,630,000 $ 53,365,000
Debt Outstanding Fiscal Years Ending 2005 and 2006
2005 2006
Redevelopment Agency
Bonds, Series 2004 ( refi of 2000) $ 40,885,000 $ 37,345,000
Redevelopment Agency Taxable Housing Bonds 18,045,000 1 6,020,000
Total Tax Allocation Bonds $ 58,930,000 $ 53,365,000
General Obligation Bonds
General Obligation Bonds, Election of 2002 Series A $ 9,820,000 $ 9,630,000
General Obligation Bonds, Election of 2002 Series B 25,000,000 2 5,000,000
Total General Obligation Bonds $ 34,820,000 $ 34,630,000
City's Certificates of Participation - General Fund
1990 Public Financing Authority $ 4,900,000 $ 4 ,575,000
1991 Public Financing Authority 3,900,000 3,800,000
1998 Public Financing Authority 17,595,000 1 7,065,000
2001 Public Financing Authority 33,545,000 3 2,845,000
2001B Public Financing Authority 9,430,000 9,095,000
2002 Public Financing Authority 35,990,000 3 5,140,000
2003 Public Financing Authority 21,930,000 2 1,095,000
Sub- Total $ 127,290,000 $ 123,615,000
1998 Public Financing Authority
( Fremont Resource Center) $ 11,335,000 $ 11,090,000
Total Certificates of Participation $ 1 38,625,000 $ 134,705,000
Total Debt Outstanding $ 2 32,375,000 $ 222,700,000
City of Fremont 2006/ 07 Adopted Operating Budget
28
City Debt Summary
Compliance with Long- Term Capital Policy
The City of Fremont's Long- Term Capital Debt Policy, adopted by the City Council
on May 7, 1996, and revised and readopted with the CIP/ ICAP on July 8, 1998,
requires that General Fund supported debt service will not exceed 7% of total
General Fund budgeted expenditures and transfers out. With FY 2006/ 07
General Fund supported debt service of $ 7,812,930, and a debt level limit of
$ 9,137,800, the City has not exceeded its debt service limit.
Computation of Compliance with Debt Service Limit
Total General Fund Budgeted Expenditures and Transfers Out $ 130,540,000
Policy Debt Level Limit,
7% of Total Budgeted Expenditures and Transfers Out $ 9,137,800
Less General Fund Supported Debt Service 7,812,930
Policy Debt Margin $ 1,324,870
Legal Debt Margin
Under State law, the City has a legal debt limitation not to exceed 15% of the total
assessed valuation of taxable property within the City boundaries. In accordance
with California Government Code Section 43605, only the City's general obligation
bonds are subject to the legal debt limit. With only $ 34,630,000 of outstanding deb
subject to the legal debt limit and a legal debt limit of $ 3,923,849,381 the City is no
at risk of exceeding its legal debt limit.
Computation of Legal Debt Margin as of June 30, 2005
Assessed Valuation ( Net) 1 $ 26,158,995,876
Debt Limit: 15% of assessed value $ 3 ,923,849,381
Less Outstanding Debt ( Subject to Legal Debt Limit) 3 4,630,000
Legal Debt Margin $ 3 ,889,219,381
1 Source: Alameda County- Controller's Office Certification.
City of Fremont 2006/ 07 Adopted Operating Budget
29
City Debt Summary
Compliance with Long- Term Debt Policy
The City’s Long- Term Debt Policy limits General Fund- supported debt to a
maximum of 7% of total General Fund budgeted expenditures and transfers
out. The City has been in compliance with this policy since it was adopted
by the City Council in 1996. General Fund- supported debt has remained on
average 25% lower than the maximum debt allowance. The forecast for
long- term debt indicates that the City will remain in compliance and will not
exceed 7% of total General Fund budgeted expenditures and transfers out.
Over the next two years, the average General Fund- supported debt will be
$ 7.8 million. The forecasted 2- year average debt is 15% below the projected
debt limit; this compliance margin is lower than the average debt margin
over the past five years because of increases in the variable interest rates
on General Fund obligations and scheduled increases in principal payments.
Compliance with Long- Term Debt Policy
FY 2001/ 02 - 2007/ 08
5.3 5.6 6.5
4.4
7.0 7.8 7.8
2.9 1.0
3.6
1.5
1.3 1.5
3.1
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
FY 01/ 02 FY 02/ 03 FY 03/ 04 FY 04/ 05 FY 05/ 06 FY 06/ 07 FY 07/ 08
Years
$ Millions
General Fund Debt Service Future General Fund Debt Service Debt Policy Margin
City of Fremont 2006/ 07 Adopted Operating Budget
30
31
Gann Limit Article XIIIB of the California Constitution ( enacted with the passage of
Proposition 4 in 1979, with modifications under Proposition 111 passed
in June 1990 and implemented by California Government Code sections
7900, and following) provides the basis for the Gann appropriation
limitation. In brief, the City’s appropriations growth rate is limited to changes
in population and either the change in California per capita income or the
change in the local assessment roll due to new, non- residential construction.
The formula to be used in calculating the growth rate is:
% change in population + 100
100
times
either
% change in per capita income + 100
100
or
% change in non- residential assessed value + 100
100
The resultant rate times the previous appropriation limit equals the new
appropriation limit.
Both the California per capita personal income price factor and the population
percentage change factors are provided by the State Department of Finance
to local jurisdictions each year. Population percentage change factors
estimate changes in the City’s population between January of the previous
fiscal year and January of the current fiscal year. Reports that present
changes in new, non- residential assessed value are provided by the County
of Alameda. These numbers provide the basis for the factor to be used in
the City’s calculation of the Gann Limit. Of the two methods above, the
City is using the “ per capita personal income” factor because it results in
the higher appropriations limit.
On May 1, 2006, the State Department of Finance notified each city of the
population changes and the per capita personal income factor to be used in
determining appropriation limits. The calculation as applied to the City of
Fremont for 2006/ 07 is:
The population on January 1 of the previous year ( 209,421) compared to
the population on January 1, 2006 ( 210,158), is 737 or a 0.35% increase.
The change in per capita personal income is 3.96%.
The factor for determining the year- to- year increase is computed as:
0.35 + 100 X 3.96 + 100 = 1.0432
100 100
City of Fremont 2006/ 07 Adopted Operating Budget
32
Gann Limit
Applying this year’s factor of 1.0432 to last year’s limit of $ 399,287,215,
the Gann Limit for FY 2006/ 07 yields $ 416,536,423.
Based on an operating budget of $ 130,540,000, Fremont is not at risk of
exceeding the Gann Limit. The Gann Limit will be adopted by the City
Council concurrently with the adoption of the FY 2006/ 07 operating budget.
33
Citywide Goals
and Objectives
In 2002, the City Council adopted a Strategic Plan that outlines a vision for
the long- term future of Fremont and proposes strategies and short- term
goals for achieving the vision. The Plan has three main purposes. First, it
communicates the City’s vision for the future to residents, businesses, and
City employees. Second, it provides guidance so that decisions are good
for today’s challenges and good for the City in the future. Making decisions
in the context of a shared vision developed through collaboration ensures
broad commitment to the success of the plan. Finally, the Strategic Plan
provides a sound framework for long- term departmental planning.
For budgeting purposes, the long- term desired outcomes and values outlined
in the plan have been adapted as citywide goals that support the City
Council’s vision. The goals are used as a framework for ensuring alignment
of department service objectives with the City Council’s vision. This section
of the budget document presents the City Council’s vision and goals from
the 2002 Strategic Plan. It also includes a matrix that illustrates the alignment
of departmental service objectives with citywide goals. Service objectives
presented here may be abbreviated for format purposes. The full narrative
text for each objective is displayed in the departmental section of the budget
document.
City Council’s Vision
Fremont, in the Year 2020, will be a globally- connected economic center
with community pride, strong neighborhoods, engaged citizens from all
cultures, and a superb quality of life.
Citywide goals
1. Strong community leadership
City Council, Boards, and Commissions work with the community to create
the long- term vision for Fremont and provide policy direction and guidance
to the City organization. The City Manager and staff carry out the long-term
vision on a daily basis through a variety of services and activities.
2. A safe community
People value a feeling of safety and security within their community. In
Fremont, residents work together and with City staff to prevent crime and
solve problems in their neighborhoods.
3. A vibrant local economy
The local economy is comprised of a strong, diversified commercial and
industrial base, providing high- quality employment for the region. It is
balanced with a strong retail sector and healthy neighborhood commercial
districts.
City of Fremont 2006/ 07 Adopted Operating Budget
34
Citywide Goals
and Objectives
4. Thoughtful, orderly use of land and protection of environmental resources
The City values a harmonious blend of natural and physical environments,
with particular priority for preservation of open space, such as the hillface
and bay wetlands. Thoughtful land use and conservation also protect people’s
social and financial investments in the community.
5. Safe and effective transportation systems
Quality of life is highly dependent on high quality transportation systems,
which enable people to get around easily. Alternatives to automobile
transportation, such as walking, cycling, and public transit are also valued.
6. Public facilities and programs for recreation
Public facilities provide individual and family entertainment, relaxation, and
education. Fremont’s public amenities include parks, community centers,
historic estates, a golf course, and related programming.
7. Historic character
Preservation of historic properties, neighborhoods, and commercial districts
enables the community to adapt to change and embrace a progressive future
while remaining true to its heritage and historic character.
8. Building a caring community
Fremont is a community where members care for each other and value
services that help families and individuals to live self- sufficiently with a
respectable quality of life. The community values a range of housing
opportunities balanced with employment opportunities to ensure that people
who work in Fremont may also live here.
9. Strong families and healthy children
Fremont is proud of its identity as an excellent place for families and children.
The City partners with the school district and other agencies and groups to
foster growth in families and provide opportunities for youth development
and community involvement.
10. Involvement of a diverse population
Fremont is an inclusive community that welcomes people of all ages, ethnicity,
income, and background. The City believes that all segments of the
population must be engaged and involved in making community decisions in
order to ensure a high quality of life and effective democracy.
11. Effective and efficient city government
The Fremont community wants honest, responsive city government serving
the community’s interests with progressive, equitable, and fiscally responsible
service delivery.
39
General Fund
Summary
The General Fund is the City’s primary operating fund. It accounts for the
majority of financial resources and outlays for basic services such as police,
fire, and maintenance, as well as the administrative systems required to
support them. The fund also accounts for the City’s discretionary funding
sources ( e. g., property tax, sales tax, vehicle license fees, franchise fees,
and business tax). As a rule, General Fund resources are used only to fund
operations that may not be funded with other, restricted revenues. Operations
that rely heavily on non- General Fund resources, such as land development,
recreation, and human services, are accounted for in other funds.
Information on these operations may be found in the “ Other Funds” section
of this document.
Since mid- 2001, the City’s budgeting environment has been characterized
by tremendous uncertainty. The recession in the high- tech sector of the
economy and State resource takeaways caused a 10% decline in General
Fund revenues between FY 2000/ 01 and FY 2003/ 04. Meanwhile, the
demand for City services and the costs of providing them increased over
the same period. Because city governments may only spend available
resources, these factors combined to prompt budget and staffing reductions
of more than 20% since FY 2002/ 03. Budget reductions of this magnitude
necessarily resulted in service reductions in all areas. The “ Budget
Overview” section of this document provides more information on these
service reductions. This section provides information on the FY 2006/ 07
General Fund budget, including budget assumptions, expenditure and
revenue highlights, transfers to other funds, reserve funds, and the financial
forecast.
The FY 2006/ 07 budget displayed in the table on the next page continues
the City’s transition to a permanently lower revenue base. Despite modest
revenue recovery, the costs of providing services are projected to exceed
ongoing revenues in FY 2005/ 06 and FY 2006/ 07. The service reductions
that would be required to balance ongoing costs with existing ongoing
revenues in FY 2006/ 07 would be harmful to the community. Additionally,
economic signals are mixed, and community discussions about service
priorities and long- term revenue solutions continue. The City is relying on
one- time bridging resources, specifically undesignated fund balance and
the Budget Uncertainty Reserve, to balance the FY 2006/ 07 budget. For
this reason, the budget allows for no restoration of services or positions
that were eliminated in recent years. Although the economy has apparently
stabilized for the moment, there are not projected to be sufficient resources
in the future to fund more than the current, inadequate levels of service.
Only with significant new revenue will the City be able to provide the high-quality
public safety, infrastructure maintenance, and other services that
Fremont residents expect.
City of Fremont 2006/ 07 Adopted Operating Budget
40
General Fund Summary
NOTE: 1) The only General Fund costs displayed in this chart for Community Development are for Community Preservation. Other
department costs are displayed in the Other Funds section of this document. 2) Maintenance activities are funded in the Integrated
Capital Assets Plan and can be found in the Capital Funds section of this document. 3) Recreation activities are funded in the
Recreation Cost Center with a combination of General Fund and fee revenues. Department costs can be found in the Cost Center/
Internal Service section of this document.
General Fund
Program Budget Eliminating Total
General Contingency Investment Uncertainty Internal General
( Thousands of Dollars) Fund Reserve Reserve Reserve Transfers Fund
Fund Balance - 6/ 30/ 06 ( est.) $ 178 $ 15,100 $ 3,020 $ 15,253 n. a $ 33,551
Revenues:
Intergovernmental:
Property Taxes 41,325 - - - - 41,325
In- lieu VLF 13,798 - - - - 13,798
In- lieu Sales Tax 8,084 - - - - 8,084
Sales & Use Taxes 25,418 - - - - 25,418
Vehicle License Fees 1,502 - - - - 1,502
Other Intergovernmental 646 - - - - 646
Business Taxes 6,941 - - - - 6,941
Hotel/ Motel Taxes 2,486 - - - - 2,486
Property Transfer Taxes 2,006 - - - - 2,006
Franchise Fees 7,862 - - - - 7,862
Charges for Services 3,217 - - - - 3,217
Fines 3,235 - - - - 3,235
Investment Earnings 2,783 - - - - 2,783
Paramedic Fees 1,065 - - - - 1,065
Other Revenues 1,050 - - - - 1,050
Total Revenues 121,418 - - - - 121,418
Total Transfers In 8,944 1,059 212 - ( 2,687) 7,528
Total Available Resources 130,540 16,159 3,232 15,253 ( 2,687) 162,497
Expenditures -
General Government 12,061 - - - - 12,061
Police 48,575 - - - - 48,575
Fire 27,760 - - - - 27,760
Transportation and Operations - - - - - -
Community Development: -
Planning - - - - - -
Building & Safety - - - - - -
Engineering - - - - - -
Community Preservation 668 - - - - 668
Housing and Redevelopment - - - - - -
Human Services 3,150 - - - - 3,150
Parks and Recreation - - - - - -
Non- departmental 2,555 - - - - 2,555
Less: Cityw ide Savings ( 1,000) - - - - ( 1,000)
TRANS Debt costs 150 - - - - 150
Total Expenditures 93,919 - - - - 93,919
Total Transfers Out 36,621 - - 1,416 ( 2,687) 35,350
Total Use of Resources 130,540 - - 1,416 ( 2,687) 129,269
Fund Balance - 6/ 30/ 07 ( est.) $ - $ 16,159 $ 3,232 $ 13,837 n. a $ 33,228
City of Fremont 2006/ 07 Adopted Operating Budget
41
General Fund Summary
Budget Assumptions
In addition to the general conditions of revenue volatility and State budget
instability, the FY 2006/ 07 budget is premised upon the following specific
assumptions:
1. Service reductions implemented in the FY 2003/ 04 and FY 2005/
06 budgets continue, with no staff added back in FY 2006/ 07.
After the technology sector recession began to affect Fremont’s
revenues in 2001, the City took early action to align expenditures with
revenues. Department budgets were reduced by 10- 35%, with the
highest priority services of police, fire, and maintenance reduced least
( on a percentage basis) for FY 2003/ 04. Continued sluggish revenue
growth prompted another budget reduction in FY 2005/ 06 equal to 5%
in all non- safety departments. Revenue projections show that
expenditures will continue to exceed revenues in FY 2005/ 06 and FY
2006/ 07, requiring the City to spend all remaining fund balance and a
portion of the Budget Uncertainty Reserve to balance the budget. Given
continued economic uncertainty, the City cannot afford to restore
eliminated services or staff positions in FY 2006/ 07. Ongoing discussions
with the community about long- term revenue solutions will inform long-term
service planning.
2. The cost of continuing FY 2005/ 06 service levels in FY 2006/ 07
will exceed projected revenues, requiring the use of all
remaining fund balance and a portion of the Budget Uncertainty
Reserve to balance the budget.
Instead of spending all of the revenues received during the “ boom”
years of the late 1990s, the City set aside a portion of annual revenues
in General Fund fund balance for use in future years. Since the City
began cutting the budget in FY 2002/ 03, it has metered in use of the
fund balance annually as a resource to smooth the transition to a lower
revenue base. For example, the City spent $ 10 million of fund balance
in FY 2001/ 02 to cover the dramatic drop in revenues that was not
detected until late in the fiscal year. If not for this resource, the mid-year
budget cuts made that year would have been $ 10 million more
severe, which would have required sudden, drastic service reductions
to the community and sudden employee layoffs. By the end of FY
2005/ 06, the City expects to have spent approximately $ 15.8 million of
fund balance ( since FY 2001/ 02) to cushion the severity of budget
cuts. The FY 2006/ 07 budget assumes that $ 0.2 million of additional
fund balance and $ 1.4 million of the Budget Uncertainty Reserve will
be required to balance the budget and avoid sharper cuts in services.
3. Despite mixed signals, the economy will continue a modest
recovery during FY 2006/ 07, enabling ongoing General Fund
resources to increase by approximately 6%.
City of Fremont 2006/ 07 Adopted Operating Budget
42
General Fund Summary
Ongoing resources reflect the revenue “ base” that continues from year
to year, excluding one- time resources and losses. The growth is
attributable primarily to the continued strength of property tax revenues,
modest growth in the sales tax base, and modest growth in business
taxes, franchise fees, and property transfer taxes. While 6% projected
growth in total resources reflects some confidence that the economy
will grow, it is only on par with the 10- year historical average growth
rate. Meanwhile, the costs of maintaining current services, especially
those costs related to personnel, such as employee medical insurance,
workers’ compensation, and retirement, as well as fuel and electricity
costs, continue to rise. Therefore, projected revenue growth will only
enable the City to keep up with current costs, with no ability to restore
services that were eliminated in recent years.
4. The General Fund’s core reserves, totaling 15% of total
expenditures and transfers in, will remain unused for FY 2006/
07.
The City maintains two General Fund reserves, whose funding is linked
to total budgeted expenditures and transfers out: the Contingency
Reserve and the Program Investment Reserve. Balances and potential
use of the Contingency Reserve and the Program Investment Reserve
are governed by City Council policies adopted in FY 1996/ 97. The
Contingency Reserve is intended to mitigate the effects of natural
disasters or other severe unforeseen events and is to be maintained at
12.5% of total operating expenditures and transfers out. The Program
Investment Reserve is available to provide seed funding for new
initiatives that will generate ongoing external revenues; it is to be
maintained at 2.5% of total operating expenditures and transfers out.
Since the conditions for using these resources are not anticipated to be
present during FY 2006/ 07, these reserve balances are expected to
remain intact.
5. The budget for employee salaries assumes an increase of 3%
over the FY 2005/ 06 levels. Actual cost for salaries will be
determined through negotiations with employee bargaining units.
The FY 2005/ 06 budget included a 4% increase in salaries based on
negotiated Memorandums of Understanding ( MOUs) with the employee
bargaining units. All MOUs are open for either full- scope or limited
renegotiation in 2006. The 3% cost growth factor applied in the FY
2006/ 07 budget provides an estimate for budgeting purposes. If
negotiated salary increases vary significantly from the budget
assumption, staff will develop options for the City Council to adjust the
budget for consistency with the adopted MOUs after budget adoption.
7. Total expenditures in the FY 2006/ 07 budget and the related
forecast include a savings assumption of $ 1 million per year
( approximately 0.8% of total resources budgeted for use in FY
2006/ 07) to compensate for the historical tendency to under-spend
total resources allocated.
City of Fremont 2006/ 07 Adopted Operating Budget
43
General Fund Summary
Despite consecutive years of budget reductions, managers continue to
hold positions vacant and restrain operational costs wherever possible.
Consequently, the City’s actual expenditure totals each year have
consistently been at least $ 1 million less than projected previously.
Building an assumption for savings into the budget helps ensure that
projections for year- end results are more accurate from the outset
than they might otherwise be.
8. The budget contains no provision for future State resource
takeaways beyond those included in the FY 2005/ 06 State budget.
The City will respond to takeaways when the amount and timing
of takeaways are confirmed by State legislative action.
The FY 2005/ 06 budget included a $ 2.7 million property tax takeaway,
the second such annual takeaway adopted as part of the State’s FY
2004/ 05 budget. Unfortunately, despite these and other previous cuts
to local government, the State continues to face a multi- billion dollar
structural deficit in FY 2006/ 07 and beyond. In 2004, voters approved
Proposition 1A, which ostensibly provides protection for local revenues.
In reality, however, it only clarifies the rules by which the State may
take local revenues. For example, the State is no longer allowed to
take local revenues, unless it has paid back funds previously taken.
While Proposition 1A provides limited protection from State takeaways,
a permanent solution to the State’s problem will likely involve taking
some amount of City revenue.
Further takeaways would be catastrophic for public safety, public
facilities, and other services. Despite increased State revenues this
year, the State’s structural budget gap remains, leaving local governments
vulnerable to additional State takeaways beginning in FY 2008/ 09. This
is the first year, under the rules of Proposition 1A, that the State can
once again turn to cities to help balance its budget. Because it is difficult
to predict when, and if, the State will take additional local government
revenues, the budget does not assume a specific amount of revenues
that will be lost to the State, thereby minimizing the risks associated
with cutting services too far in anticipation of State cuts that may not
materialize. If it appears the State is thinking about additional takeaways,
staff will develop contingency plans so that the City may quickly respond
to State actions. To support this assumption, the budget contains a
Budget Uncertainty Reserve that could be used to forestall the need for
immediate service cuts.
Resources
General Fund resources include revenues, transfers into the General Fund
from other funds, undesignated fund balance, and General Fund Reserves.
Total budgeted resources will be adequate to support total budgeted
expenditures of $ 130.5 million, so the budget is considered balanced.
However, when one- time sources ( i. e., fund balance and reserves) are
City of Fremont 2006/ 07 Adopted Operating Budget
44
General Fund Summary
excluded, the sum of ongoing revenues, highlighted in Table # 1, plus recurring
transfers in from other funds, falls short of covering the service costs by
$ 1.6 million. Bridging the gap will require spending all of the remaining
fund balance, estimated to be $ 0.2 million, and $ 1.4 million from the Budget
Uncertainty Reserve.
Property taxes are projected to remain the City’s largest revenue source in
FY 2006/ 07. Despite the decline in other major revenues since the peak
year of FY 2000/ 01, property tax revenues have remained strong. Residential
property values comprise two- thirds of Fremont’s property tax base.
Relatively low mortgage interest rates and high demand for real estate
continue to drive residential property values higher. Property tax revenues
in FY 2005/ 06 are estimated to increase 6% over the prior year. Revenue
the City will receive in FY 2006/ 07 is based on property valuation as of
January 1, 2006, and reflects continued valuation strength and market vigor.
Therefore, property tax revenues are projected to grow by 6% in FY 2006/
07 to $ 41.3 million. Staff will continue to monitor the real estate market.
The effects of the current cooling trend in transaction volume will temper
staff’s outlook for FY 2007/ 08 growth, now projected at 5% growth.
Table # 1: Change in General Fund Resources
FY 2005/ 06 to FY 2006/ 07 ($ millions)
Revenues FY 2005/ 06 est. FY 2006/ 07 budget Difference
Property taxes $ 39.0 $ 41.3 +$ 2.3
Sales and use taxes 24.2 25.4 + 1.2
“ Triple flip” sales tax replacement 7.2 8.1 + 0.9
Vehicle License Fees ( VLF) 1.4 1.5 + 0.1
VLF property tax replacement 13.5 13.8 + 0.3
Business taxes 6.6 6.9 + 0.3
Franchise fees 7.6 8.0 + 0.4
Hotel/ motel tax 2.3 2.5 + 0.3
Investment earnings 2.7 2.8 + 0.1
Other revenues 10.1 11.1 + 1.0
Ongoing revenues subtotal 114.6 121.4 + 6.8
Recurring transfers from other funds 6.9 7.5 + 0.6
One- time losses/ bridging resources
Revenue loss ( State ERAF III) - 2.7 0.0 + 2.7
Use of undesignated fund balance 7.2 0.2 - 7.0
Use of Budget Uncertainty Reserve 0.0 1.4 + 1.4
Total budgeted resources $ 126.0 $ 130.5 $ 4.5
City of Fremont 2006/ 07 Adopted Operating Budget
45
General Fund Summary
In contrast to the consistently strong trend for property tax revenues, sales
tax trends are emblematic of the City’s revenue volatility. After reaching a
high point of $ 33.2 million in FY 2000/ 01, sales tax revenues endured a
multi- year decline to a low point of $ 26.8 million in FY 2003/ 04. The steep
drop was caused by the collapse of the Silicon Valley technology market
and Fremont’s reliance on sales taxes from high- tech manufacturers. Sales
taxes from the high- tech sector now appear to be stabilizing. In addition,
the City’s efforts to diversify and strengthen the sales tax base by increasing
the consumer retail sales and auto sales tax bases are beginning to pay off.
Based on recent quarters’ strong retail receipts, the City is projecting 13%
revenue growth for FY 2005/ 06. While the receipts from recent quarters
are encouraging, Chart # 1 illustrates the volatility that complicates
forecasting efforts. Staff is not yet confident that a long- term positive
trend is underway. Therefore, the revenue projections assume that sales
tax revenue will grow modestly, by 5%, for FY 2006/ 07.
The City now receives its sales tax revenues in two parts: 75% from the
traditional share of the sales taxes paid on consumer purchases, and 25%
from the “ triple flip” property tax replacement revenue. The “ triple flip”
refers to the State’s mechanism for financing its 2004 Economic Recovery
bonds, whereby the State receives 25% of cities’ sales tax revenues in
exchange for an equal amount of additional property taxes. The amount of
property tax replacement revenue is equal to 25% of “ regular” sales tax
revenues generated in the prior fiscal year. Since “ regular” sales tax
revenues areprojected to grow by 13% in FY 2005/ 06, the triple flip
replacement portion ( 25% of total) of the City’s sales taxes are projected
to grow by the same factor in FY 2006/ 07, yielding $ 8.1 million. The
aforementioned 5% growth rate is projected for the “ traditional” sales tax
( 75% of total), yielding $ 25.4 million in FY 2006/ 07. Together, both
components of sales tax are projected to total $ 33.5 million in FY 2006/ 07.
Vehicle license fee ( VLF) revenues also come to the City in two parts. The
first part, VLF paid by motorists, remains at one- third of historical levels.
* Data not necessarily reflective of actual revenues received. Data adjusted for economic period payment
irregularities to illustrate underlying economic conditions.
Chart # 1 - Sales Tax Volatility: FY 1999/ 00 -- FY 2005/ 06 ( Q4)
Quarterly Change* from Same Quarter of the Prior Year
- 20.0%
- 10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
FY 99/ 00 FY 00/ 01 FY 01/ 02 FY 02/ 03 FY 03/ 04 FY 04/ 05 FY 05/ 06
City of Fremont 2006/ 07 Adopted Operating Budget
46
General Fund Summary
VLF revenues are allocated statewide, based on population, and are expected
to grow by 5% in FY 2006/ 07. The second part comes in the form of
additional property taxes. Instead of receiving backfill for the remaining
two- thirds directly from the State General Fund, local governments now
receive additional property tax revenues. The amount received is based on
the City’s growth in assessed property valuation. Since the City’s assessed
valuation grew by 7.9% in FY 2005/ 06, staff expects the property tax
component of vehicle license fee revenues to grow by 7.9% in FY 2006/ 07.
After accounting for a one- time State payment of $ 0.7 million in FY 2005/
06, the total from both components is projected to grow from $ 14.9 million
in FY 2005/ 06 to $ 15.3 million in FY 2006/ 07.
Hotel/ motel tax revenues were rocked by the Silicon Valley recession. While
not the City’s largest revenue source, hotel/ motel taxes declined by the
largest percentage, a staggering 60%, between FY 2000/ 01 and FY 2003/
04. This decline is the most striking, and perhaps most symbolic, example
of revenue volatility stemming from the downturn in the economy. Between
FY 1998/ 99 and FY 1999/ 00, hotel/ motel tax revenues nearly doubled,
growing to $ 4.3 million in FY 2000/ 01 before dropping to a low of $ 1.8
million in FY 2001/ 02. Five years after the sharp drop, staff believes that
the hotel market may have stabilized; monthly receipts through February
2006 show approximately 15% revenue growth from the same period of
2005. The FY 2006/ 07 projection of 10% growth, which would yield $ 2.5
million in revenues, reflects cautious optimism that the rebound will continue.
Business taxes and franchise fees remain relatively stable, with moderate
growth projected for both. Business taxes are projected to yield $ 6.6 million
in FY 2005/ 06, and $ 6.9 million in FY 2006/ 07. The City levies franchise
fees on providers of electricity, natural gas, residential garbage and recycling,
and cable television services. Franchise fee revenues are based on
franchisee gross revenues, which are largely a function of rates and customer
usage. Electricity and gas franchise fees are the most volatile, and have
the largest effects on City revenues. Franchise fee revenue was virtually
flat for FY 2005/ 06, mostly because PG& E held rates constant during the
fee reporting period. Planned electric and gas rate increases for FY 2006/
07 are driving staff’s projection for 5% revenue growth, which would result
in $ 8.0 million in total fee revenues.
Table # 1 includes a line for “ other revenues,” which contains charges for
services, law enforcement fines, paramedic fees, and State reimbursements
for mandated services. With the exception of law enforcement fines, the
revenues in this category are each projected to grow at a rate of 3- 5%,
comprising $ 0.6 million of the increase. The balance of the projected increase
is attributable to $ 0.4 million in additional revenues from fines resulting
from expansion of the red- light enforcement program. Much of the new
revenue will be required to offset the cost of expanding the program.
The General Fund receives transfers from other funds for general government
services ( such as human resources, finance, and legal assistance) provided
to operations funded outside the General Fund ( such as development services
and recreation services). Charges are based on the non- General Fund
operation’s proportional share of the total operating budget expenditures
City of Fremont 2006/ 07 Adopted Operating Budget
47
General Fund Summary
and transfers out. This proportional share of the total budget is the share of
general government service costs allocated. In FY 2005/ 06, transfers in
from other funds are projected to be $ 6.9 million. Based on budgeted
expenditures, transfers in are expected to total $ 7.5 million in FY 2006/ 07.
Undesignated fund balance is another resource available to balance the
budget. If, in a given year, total resources available exceed total uses, the
“ surplus” increases fund balance. Fund balance has been a crucial resource
for cushioning the City’s transition to a lower revenue base in recent years.
Instead of spending all of the revenues received during the “ boom” years
of the late 1990s, the City set aside a portion of annual revenues in fund
balance for use in future years. When revenues dropped suddenly during
FY 2001/ 02 and the City anticipated a year- end budget shortfall, the City
used $ 10 million of fund balance to balance the budget. If fund balance had
not been available, the City would have had to use reserve funds or suddenly
cut services, through staffing layoffs, to end the year in financial balance.
The City is expecting to spend $ 7.3 million of fund balance in FY 2005/ 06 to
cover the expected budget shortfall caused by several factors: 1) a $ 2.7
million State takeaway, 2) increased costs to pay interest on the City’s
variable rate debt, and 3) a one- time transfer of $ 4.1 million to the Budget
Uncertainty Reserve. The transfer is the final step in resolving a multi-year
sales tax appeal to the State Board of Equalization ( SBE) related to
$ 4.1 million of sales tax revenue generated in Fremont that the SBE had
incorrectly allocated to other communities. Resolution of the appeal required
the City to recognize the revenue in FY 2004/ 05. In FY 2005/ 06, the City
Council transferred the revenue to the Budget Uncertainty Reserve pending
further consideration of budget priorities. Using $ 7.3 million of fund balance
in FY 2005/ 06 would leave only $ 0.2 million of undesignated fund balance
for use in the future. The FY 2006/ 07 budget assumes that the remaining
fund balance and $ 1.4 million of Budget Uncertainty Reserve funds will be
required to balance the budget and avoid further cuts in services.
Expenditures
The City has been transitioning to a permanent lower revenue base for
several years. The tech sector recession that began in 2001, coupled with
the terrorist attacks of September 11, 2001, caused a dramatic drop in City
revenues in FY 2001/ 02 and FY 2002/ 03. That relatively sudden revenue
shock prompted budget cuts for FY 2003/ 04 of greater than 20% and service
cuts throughout the City organization. These cuts were disruptive to the
community and to City employees; 224 positions were eliminated,
approximately half of which were filled and required layoffs. While difficult,
the FY 2003/ 04 reductions afforded the City some time during FY 2004/ 05,
without budget cuts, to monitor the economy and survey the community
before making further budget and service cuts. Following a rejected revenue
ballot measure in November 2004 that would have enabled the City to
close the budget gap and restore services, the City cut ongoing costs once
again, equal to 5% in all non- safety functions, for the FY 2005/ 06 budget.
City of Fremont 2006/ 07 Adopted Operating Budget
48
General Fund Summary
These reductions, along with the use of fund balance to prevent deeper
cuts, helped the City bring ongoing costs into line with a permanently lower
revenue base. Projected service costs for FY 2006/ 07 continue to exceed
ongoing revenues, but the availability of fund balance and the Budget
Uncertainty Reserve will enable the City to avoid further service reductions
this year while discussions with the community about permanent solutions
continue.
FY 2006/ 07 budgeted expenditures and transfers to other funds total $ 130.5
million. The budget maintains the City Council’s long- time funding priorities
by allocating 76% of the budget to direct costs for public safety and
maintenance ( in Chart # 2, maintenance is represented by the General Fund
budget for Transportation and Operations, and Parks and Recreation). As
Chart # 3 shows, the share of General Fund resources budgeted for these
purposes is actually 86%, when overhead costs required to support them
Charts # 2 and # 3: FY 2006/ 07
General Fund Budgeted Expenditures and Transfers Out
are allocated. Maintaining these priorities within constrained revenues and
in the face of rising costs makes it impossible for the City to continue
providing other services at the levels the community has come to expect.
The FY 2006/ 07 budget continues all of the service reductions implemented
since FY 2001/ 02. The “ Budget Overview” section of this document
chronicles the service impacts of recent budget cuts in more detail. Without
new revenues, services will continue to deteriorate, and slow revenue growth
will preclude the investments required to keep Fremont a high- quality
community.
The $ 130.5 million budgeted for ongoing services in FY 2006/ 07 is 7%
higher than comparable expenditures and transfers out in FY 2005/ 06. The
budget does not fund any new programs or new positions; increases are
attributable to rising costs of maintaining the existing, reduced, service base.
Distributed by Department
Community Development
2%
Capital projects
2% Other
3%
Parks & Recreation
6%
Human Services
2%
Debt Service
6%
General Government
9%
Trans. & Ops.
12% Fire
21%
Police
37%
Distributed by Function
Other
4%
Capital Projects
Community Development 2%
2% Recreation
2%
Human Services
3%
Maintenance
20%
Fire
24%
Police
43%
City of Fremont 2006/ 07 Adopted Operating Budget
49
General Fund Summary
Like all businesses, the City must cope with rising costs for everything from
service contracts and utilities to employee salaries, health care, and workers’
compensation.
Basic city services, such as police, fire, and maintenance, are labor- intensive.
Therefore, the City’s budget is largely driven by labor- related costs, including
salaries, health benefits, and retirement system contributions. These costs
comprise 81% of the FY 2006/ 07 budgeted expenditures ( excluding transfers
out to other funds), or $ 75.5 million. These costs, in total, are increasing
3% from FY 2005/ 06 levels. Notably, retirement system costs are
decreasing by $ 500,000 for FY 2006/ 07.
Risk management costs, specifically workers’ compensation and general
liability, and rising interest rates are other significant factors in overall cost
increases for FY 2006/ 07. The budget for workers’ compensation is
increasing $ 400,000, based on recent actuarial studies that reflect increasing
injuries in public safety departments. In the general liability area, actual
costs have not increased significantly, but a change in the way the City
budgets for an annual premium rebate requires a budget increase of
$ 500,000. Beginning in FY 2006/ 07, the budget will include the full premium
amount, and the rebate received will reduce actual expenditures for the
year, and will then be reflected in funding needs in the following fiscal year.
Additional information on Risk Management costs may be found in the
Internal Service Fund section of this document.
Other cost increases for FY 2006/ 07 are routine and modest, linked to
assumptions for general consumer inflation. The budget for materials,
supplies, and other non- staffing items is increasing by 1%.
Transfers Out to Other Funds
In addition to direct expenditures, the General Fund transfers resources to
other funds to support activities that cannot be supported through fees,
grants, or charges for service. These activities range from capital projects
and debt service, to maintenance and certain cost center operations, to
reserve accounts with specific purposes. The transfer supporting debt
service costs is the most significant change from the FY 2005/ 06 level.
Approximately $ 1.1 million of the $ 1.7 million budget increase results from
rising interest rates on the City’s variable rate debt. The remaining $ 600,000
reflects the end of a “ credit” in FY 2006/ 07 that has provided budget relief
in recent years. The credit resulted from the decision in 2002 to cancel
plans to build Fire Station # 11 in light of the severe spending cuts underway
at the time. A portion of the proceeds from bonds that had been issued in
2002 for the construction of the new Maintenance Center and Fire Station
# 11 were reallocated to pay the debt service on those bonds. The use of
bond proceeds to repay debt saved the General Fund more than $ 2.9 million
in debt service over three years. With no proceeds remaining to offset
costs in FY 2006/ 07, the budget must increase to support the full cost of the
debt service for the Maintenance Center.
City of Fremont 2006/ 07 Adopted Operating Budget
50
General Fund Summary
The transfer to Maintenance is increasing by $ 1.0 million, which is 5%
more than the FY 2005/ 06 level. This amount will partially cover increasing
employee costs, information systems costs associated with the new
Maintenance Center, and the Maintenance share of increasing risk
management costs.
Transfers to cost centers, which are enterprise- like mechanisms for funding
the Community Development, Recreation, and Senior Center functions,
are increasing by $ 1.1 million, to $ 5.1 million total. The increase follows a
year during which the transfers to the Community Development and
Recreation cost centers were reduced by $ 500,000 each, on a planned
one- time basis ( in addition to the citywide 5% reduction), to help balance
the General Fund budget. After excluding the $ 1 million restoration of
General Fund support from the percentage change calculation, the ongoing
level of support for the function is increasing by 2% for FY 2006/ 07.
The General Fund contains three reserves that may be funded with annual
transfers from the General Fund:
• the Contingency Reserve, which is intended to help mitigate the effects
of natural disasters and severe, unforeseen events;
• the Program Investment Reserve, which provides a source of working
capital for new initiatives that have the potential to generate significant
funding from external sources; and
• the Budget Uncertainty Reserve, which is intended to offset quantifiable
revenue uncertainty in the budget.
Table # 2 summarizes the FY 2005/ 06 projected funding levels for each
reserve. Funding levels for the Contingency Reserve and the Program
Investment Reserve are linked to the amount of total expenditures and
transfers out budgeted each year ( 12.5% and 2.5%, respectively). Based
on the budget for expenditures and transfers out, the transfer to these
reserves will total $ 1.3 million in FY 2006/ 07. As the table below illustrates,
total General Fund reserves are increasing from $ 33.4 million to $ 34.6 million
to keep their balances in compliance with City Council reserve policies
( which can be found in the “ Policies and Glossary” section of this document).
The Budget Uncertainty Reserve does not have a targeted funding level,
so there is no required contribution in FY 2006/ 07.
Table # 2: General Fund Reserves
FY 2005/ 06 FY 2006/ 07 FY 2006/ 07 FY 2006/ 07
est. balance transfer projected use balance
Contingency Reserve $ 15.1 M $ 1.1 M $ 0.0 M $ 16.2 M
Program Investment Reserve 3.0 0.2 0.0 3.2
Budget Uncertainty Reserve 15.3 0.0 ( 1.4) 13.9
Total General Fund Reserves $ 33.4 M $ 1.3 M $( 1.4) M $ 33.3 M
City of Fremont 2006/ 07 Adopted Operating Budget
51
General Fund Summary
The FY 2006/ 07 budget does not anticipate the need to spend the City’s
two core reserves. Experience since FY 2001/ 02 has reminded the City
how quickly the economy can change or the State can take City revenues
to solve its problem. Related budget experience has further shown how
quickly one- time resources ( fund balance, for example) can be consumed
in response to sudden revenue losses. With these lessons in mind, the City
is reluctant to spend reserves. Reserves are one- time resources, and are
therefore not replaced once they are spent. For FY 2006/ 07, however, the
City is projecting the need to spend $ 1.4 million of the Budget Uncertainty
Reserve to help balance the budget.
Financial Forecast
The financial forecast is a planning tool that helps staff identify important
trends and anticipate the longer- term consequences of budget decisions.
While not perfect, the forecast tools have been instrumental for modeling
the effect of such recent budget issues as rising retirement system costs,
the short- and long- term consequences of issuing variable rate debt, and
potential scenarios of future revenue performance. The ability to model
cost and revenue trends beyond the next budget year helps the City make
proactive budget decisions early in an economic cycle, such as the recent
economic downturn. As a case in point, delaying the budget cuts adopted
with the FY 2003/ 04 budget would have resulted in even larger gaps to
close, and more drastic solutions to endure, in FY 2005/ 06 and FY 2006/ 07.
The forecast is not a plan, but a model based on cost and revenue assumptions
that are updated continuously. Of these components, future cost projections,
based on known costs, are relatively reliable. Revenue forecasts, on the
other hand, are based on assumptions related to future economic conditions,
which are fraught with uncertainty. Economic forecasts in financial markets
and the media swing from optimistic to pessimistic on a seemingly weekly
basis. For this reason, the forecast is updated continuously, and is the
subject of periodic City Council discussion.
Other key forecast assumptions:
• While Proposition 1A, passed by voters in 2004, provides limited
protection for local revenues, potential State revenue takeaways are
T ab le # 3: K ey G eneral F u n d R evenues: A nnual G row th
A ssump tion s
FY 2006/ 07
budget
FY 2 0 0 7 / 0 8
pro ject io n
P ro perty taxes 6% 5%
Sa le s and u se taxe s 5% 4%
Veh ic le lice nse fee s ( VLF) 5% 5%
VLF p ro perty tax rep lac ement 8% 7%
Business taxes 5% 5%
Hote l/ mo te l taxes 10% 10%
Franchise fees 5% 5%
City of Fremont 2006/ 07 Adopted Operating Budget
52
General Fund Summary
not predictable enough to warrant modeling, and are not included in the
forecast.
• Significant additional revenues within existing revenue categories ( e. g.,
property and/ or sales tax) due to planned new construction is included.
• All service reductions and corresponding budget reductions implemented
in prior years remain in place for the forecast period.
• Commitments are included for fund transfers contained in the adopted
FY 2005/ 06 – FY 2009/ 10 CIP/ ICAP.
• Commitments are included for all known and anticipated debt service.
The financial forecast may be found on page 71 of the budget document.
Projected costs exceed projected resources ( excluding fund balance and
reserves) through FY 2006/ 07. The forecast suggests that beginning in FY
2007/ 08, resources will be adequate to support the anemic service levels
adopted with the FY 2006/ 07 budget, albeit with practically no ability to
restore services or increase investments in maintenance or capital projects.
Without significant new resources, the City will be unable to deliver the
service levels the community expects and that make Fremont a great
community.
City of Fremont 2006/ 07 Adopted Operating Budget
53
General Fund
Operating
Resources
General Fund Available Resources
Fiscal Year 2006/ 07: $ 130,540,000
Property Tax
31%
In- lieu VLF
11%
Operating Transfers In
6%
Interest Income
1%
Other Revenues
3%
In- lieu Sales Tax
6%
Sales & Use Taxes
20%
Franchise Fees
2%
Hotel/ Motel Taxes
2%
Vehicle License Fees
1%
Other Taxes & Fees
16%
Budget Uncertainty Reserve
1%
O T f
City of Fremont 2006/ 07 Adopted Operating Budget
54
General Fund
Allocation of
Resources
General Fund Expenditures
Fiscal Year 2006/ 07: $ 93,919,000
General Fund Transfers Out
Fiscal Year 2006/ 07: $ 36,621,000
Other
Human Services 4%
3%
General Government
13%
Fire
29%
Police
51%
Reserves
3%
Maintenance & Capital
Projects
62%
Cost Centers
14%
Debt
21%
55
General Fund appropriations not directly associated with specific
departments are classified as “ nondepartmental.” Expenditures and certain
types of anticipated general savings that are not identified with or allocated
to individual departments are included in the non- departmental budget.
Budgeted Expenditures
• Annual Operating Contingency Account
• Employee leave cash- out
• Property tax administration fee and revenue
audit fees
• Other non- departmental
Non- Departmental Budget
$ 625,000
Non- Departmental
Budget
1,000,000
490,000
$ 2,555,000
440,000
City of Fremont 2006/ 07 Adopted Operating Budget
56
57
General Fund
Revenues
General Fund Revenue History and Forecast
( Excluding one- time effects and transfers- in )
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
95/ 96 96/ 97 97/ 98 98/ 99 99/ 00 00/ 01 01/ 02 02/ 03 03/ 04 04/ 05 05/ 06 06/ 07 07/ 08
$ Millions
FY 2006/ 07 projected revenue = $ 121.4 M
Change from FY 2005/ 06 = 6.0%
10- year historical average percentage change = 5.9%
Overview
Total FY 2006/ 07 General Fund estimated revenues ( excluding transfers
from other funds, fund balance, and reserves) are $ 121.4 million, which is
$ 6.8 million, or 6%, more than total on- going estimated revenues for FY
2005/ 06. The FY 2005/ 06 revenues were reduced by the second and final
$ 2.7 million shift of property tax to the State. Seventy- five percent of the
City’s revenue is controlled by the State, including property taxes, sales
taxes, and vehicle license fees; all of which the State has manipulated in
recent years.
In March 2000, Fremont and the rest of Silicon Valley were riding a stock
market crest and enjoying the fruits of that summer’s record shipments of
the high- tech products produced in the area. The winter 2000 “ dot- com”
collapse ushered in a recession that shook the stock market, decimated
local governmental revenues, and began a period of financial crisis for both
the City and the State of California. As the graph below shows, City
revenues declined sharply between FY 2000/ 01 and the end of FY 2002/
03.
Although the City’s revenue base and its local economy are showing signs
of revival, continuing uncertainty caused by both the unpredictable economy
and the lack of city- controlled revenue sources remains the central challenge
to budgeting revenues for FY 2006/ 07. This section provides additional
background and forecast information for the following key General Fund
revenues:
• Property Taxes
• Sales and Use Taxes – including “ triple flip” revenues
• Vehicle License Fees ( VLF) – including the VLF replacement revenues
• Franchise Fees
• Hotel/ Motel Taxes
• Business Taxes
City of Fremont 2006/ 07 Adopted Operating Budget
58
General Fund Revenues
Where Does Property Tax Go?
( Distribution of 1% tax paid on assessed property value)
State - ERAF
shift to schools
28%
Schools &
Colleges
23%
Special Districts
12%
Library
2%
Alameda County
General Fund
20%
City of
Fremont
15%
Property Taxes
Description: Property tax is an ad valorem tax ( based on value) imposed
on real property ( land and permanently attached improvements such as
buildings) and personal ( movable) property. Proposition 13, adopted by
California voters on June 6, 1978, created a comprehensive system for the
assessment and limitation of real property taxes. Property owners pay the
tax based on their real property’s adjusted assessed full value. Proposition
13 set the FY 1975/ 76 assessed values as the base from which future
annual inflationary assessed value increases would grow ( not to exceed
2% for any given year). The County Assessor also re- appraises each real
property parcel when there are purchases, construction, or other statutorily
defined “ changes in ownership.” Proposition 13 limits the property tax rate
to 1% of each property’s full value plus overriding rates to pay voters’
specifically approved indebtedness. Property taxes are the City’s single
largest revenue source, comprising approximately 35% of total FY 2005/ 06
projected revenues, or $ 39.0 million.
The City of Fremont receives 15 cents of every dollar of property tax paid
( see graph below). Alameda County and the Fremont Unified School District
receive most of the revenue from property taxes assessed on real property
located in the City.
Proposition 13 ( Section 1, Article XIIIA, of the State Constitution) transferred
control and accountability for property tax rates from city and county
governments to the State government. It allows the State Legislature to
apportion property tax collections among the various cities, counties, and
special districts “ according to law.” In the late 1970s, the State Legislature
settled on an allocation method under which each local government’s
percentage share of property taxes was the same as that government’s
prorated share of the entire county’s property taxes in the mid- 1970s.
Beginning in 1992, the Legislature reduced city allocations through the
ERAF I and ERAF II legislation so that tens of millions of dollars in City
property taxes were transferred to the schools. This shift costs the City of
City of Fremont 2006/ 07 Adopted Operating Budget
59
General Fund Revenues
Property Tax History and Forecast
( FY 1995/ 96 - FY 2007/ 08)
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
95/ 96 96/ 97 97/ 98 98/ 99 99/ 00 00/ 01 01/ 02 02/ 03 03/ 04 04/ 05 05/ 06 06/ 07 07/ 08
FY 2006/ 07 projection= $ 41.3 M
FY 2006/ 07 projected change= 6.0%
10- year historical average change= 6.5%
Fremont approximately $ 12 million per year. More recently, in FY 2003/ 04,
the Legislature again re- allocated property taxes by adopting ERAF III.
This cost the City of Fremont and the Redevelopment Agency $ 5.4 million
and $ 4.6 million, respectively, in FY 2004/ 05 and FY 2005/ 06.
California voters passed Proposition 1A on November 4, 2004, giving
California cities some relief from future State tinkering with traditionally
local revenues. The State Legislature can only change city property tax
allocations in emergencies upon a two- thirds vote in both legislative bodies,
and then for only two years before the revenue has to be repaid. While not
perfect, these provisions help reduce the City’s revenue uncertainty
somewhat for FY 2006/ 07.
Forecast: Property tax revenues are projected to total $ 39.0 million in FY
2005/ 06. Staff projects a 6% growth rate for FY 2006/ 07, which would
yield $ 41.3 million.
Including inflationary growth ( based on Consumer Price Index increases
with a maximum increase of 2% over a property’s prior year full value
assessment), City real property assessed values increased at almost an 8%
clip because of the Bay Area’s phenomenal housing market over the last
three years. Real estate sales volume slowed in early 2006, but both volume
and values remain strong by historical standards. Fremont housing market
price increases over the past five years established the basis for projected
property tax growth in FY 2006/ 07 because the taxes are based on January
1, 2006 assessments.
City of Fremont 2006/ 07 Adopted Operating Budget
60
General Fund Revenues
Key Factors in the Forecast: The most significant property tax revenues
indicator is the change in property assessed values. Properties are re-appraised
upon most ownership changes and for new construction. Strength
in Fremont’s real estate market drove both the assessed values and City
revenue growth in the second half of the 1990s, and again in the middle
2000s. The taxes for FY 2006/ 07 were assessed effective January 1,
2006, so price declines that might be caused by interest rate hikes and other
market influences will not change these values. Even a moderate decline
in housing sales prices ( as forecast by certain economists) will not seriously
strain the City’s FY 2006/ 07 revenue forecasts because the taxes are based
on the January 1, 2006 assessment.
However, interest rate increases pose a risk to the housing market’s
continuing vitality. Much of the value run- up relates to historically low
home mortgage interest rates. These low rates may be ending. The federal
central bank’s Federal Open Market Committee ( FOMC) reduced the
federal discount interest rate 13 times after the dot- com collapse and the
September 11, 2001 terrorist attacks. This rate reached 1% on June 25,
2003, and stayed there for a year. Since June 2004, the FOMC raised this
key rate in 15 one- quarter percent increments until it stood at 4.75% on
March 28, 2006. FOMC committee member comments suggest that more
rate increases are likely. Although the federal discount rate is a short- term
rate used for overnight borrowings by Federal Reserve System banks, it
has a wide- spread effect on the financial markets. These rate increases
put upward pressure on home mortgage rates — especially adjustable-rate-
mortgages ( ARM) that are tied to interest rate indices.
By some estimates, more than 30% of the home sales in California are now
financed by ARM loans. Higher interest rates could cause these mortgage
interest rates to reset to the higher rates. Although many economists discount
the possibility of a “ housing bubble burst” similar to the dot- com collapse, a
significant housing adjustment could dampen the overall local economy.
Substantial real property sales volume and property value declines pose
economic risks to future City property tax and sales tax growth rates. Sales
taxes could be affected by a reduction in consumer purchasing power in
the face of falling home values.
The fledgling high- tech industry recovery is encouraging, but still fragile.
Although not a factor to date, vacant commercial, research, and/ or industrial
properties increase the risks of property valuation appeals ( lower re-appraised
values can reduce assessments and revenues) and of property
tax payment delinquencies. Commercial and industrial properties comprise
about one- third of Fremont’s property tax base.
The State projects that its revenues will be sufficient to meet its financial
obligations in FY 2006/ 07, but that optimism rests on one- time revenues
related to recently surging personal income and corporate tax receipts.
While Proposition 1A provides limited protection from future State take-aways,
beginning in FY 2008/ 09, the State could again “ borrow” property
tax and/ or sales tax
City of Fremont 2006/ 07 Adopted Operating Budget
61
General Fund Revenues
revenues from local agencies on a two- thirds vote of the Legislature if a
new financial crisis develops.
Despite risks to the property tax base, the steady property transfer tax
revenues reflected in the chart above provde evidence that Fremont real
property is still changing hands through real estate transactions. This activity
decreases the possibility of steep negative adjustments to property tax
revenues. Generally, real property transactions that generate property
transfer taxes also trigger re- assessment under Proposition 13.
Sales and Use Tax
Description: The local sales and use tax rate is 8.75%. Sales tax is
collected on the sale of taxable goods within Fremont. Use tax is the
corresponding tax on transactions involving taxable goods purchased out of
state for use or storage in Fremont. Sales and use taxes are collected by
the State which then pays local government its respective share. Sales and
use taxes ( collectively, “ Sales Taxes” in the budget) are the City’s second-largest
revenue source and comprise about 28% of FY 2006/ 07 General
Fund revenues.
In March 2004, California voters passed Proposition 57 approving the sale
of State Economic Recovery Bonds. The bond proceeds were used to
fund the State’s cashflow deficit and avert an operational financial crisis.
To issue the bonds, the State needed a steady revenue source it could
pledge to secure its payments – like sales taxes. To solve its problem, the
State implemented the “ triple flip.” Under the “ triple flip,” the State’s bonds
are secured by a quarter cent increase in the State’s share of sales tax with
a corresponding decrease in local governments’ share of sales tax ( there
was no sales tax rate change). To compensate for the loss, local governments
will receive additional real property taxes, that would otherwise go to the
schools ( which will receive State General Fund payments), until the State’s
Economic Recovery Bonds are repaid. The additional property taxes are
to replace the lost sales taxes on a dollar- for- dollar basis.
Property Transfer Tax
FY 1997/ 98-- FY 2006/ 07
0.0
0.5
1.0
1.5
2.0
2.5
97/ 98 98/ 99 99/ 00 00/ 01 01/ 02 02/ 03 03/ 04 04/ 05 05/ 06 06/ 07
$ Millions
City of Fremont 2006/ 07 Adopted Operating Budget
62
Before FY 2004/ 05, the sales tax rate in Fremont was 8.25%. The City
received 12.1% of the tax paid, which was approximately 1% of the price
paid for the good. In March 2004, Alameda County voters passed Measure
A, which raised the sales tax rate by 0.5% to 8.75% to fund County Health
Care Services. As shown below, the City’s receives 0.75% of each taxable
sale, which equates to 8.6% of total sales tax revenues collected by all
jurisdictions, down from the 12.1% we used to receive.
* Alameda County receives a 5% share of the City’s share of sales taxes, or 0.05% of
the total. This means that the City’s actual share is 0.71% after the triple flip.
Forecast: FY 2005/ 06 sales tax revenues, including the “ triple flip”
replacement, are projected to be $ 31.4 million. The FY 2006/ 07 budgeted
amount is $ 33.5 million, or $ 2.1 million more. For projection purposes, sales
taxes have several components: the local retail economic base, the property
tax replacement related to the triple flip, and Proposition 172 sales tax
revenue. The following table relates the component projections to the total.
General Fund Revenues
Where Does Sales Tax Go?
( Distribution of 8.75% paid, including the effect of the
“ triple flip” legislation)
City of Fremont
0.75%*
BART 0.5%
Prop. 172 0.5%
Countywide
Transportation
0.75%
County Health &
Welfare 0.5%
County Health Care
Services 0.5%
State 5.25%
The local retail economic base is generally considered “ regular” sales tax.
It is the 0.75% of the price paid for taxable goods, referenced above, that is
received by the City. Of the $ 2.1 million projected increase, approximately
Projection component FY 2005/ 06 est. FY 2006/ 07 proj. Difference
“ Regular” retail sales economy $ 22.9 M $ 24.0 M +$ 1.1 M
“ Triple flip” property tax replacement 7.2 8.1 + 0.9
Prop. 172 sales tax 1.3 1.4 + 0.1
Total $ 31.4 M $ 33.5 M +$ 2.1 M
es
Sales Taxes
City of Fremont 2006/ 07 Adopted Operating Budget
63
General Fund Revenues
$ 1.1 million is attributable to growth in the retail base. This increase of 5%
from the FY 2005/ 06 level reflects staff’s assumption for modest economic
growth in FY 2006/ 07. Staff expects existing retail businesses to generate
two- thirds of this amount, with the remaining one- third coming from new
retail opening in FY 2006/ 07 at Pacific Commons and other locations in
Fremont.
The “ triple flip” property tax replacement revenues are projected to increase
by $ 0.9 million in FY 2006/ 07. The replacement revenues the City receives
is based on the growth in “ regular sales tax” revenues from the prior year.
Since sales tax revenues are projected to grow by 13% in FY 2005/ 06; the
“ triple flip” component of FY 2006/ 07 sales taxes are projected to grow by
the same amount.
Prop. 172 sales taxes are the City’s share of the one- half cent sales tax for
public safety services approved by California voters in 1993. In FY 2005/
06, the City’s share is expected to be $ 1.3 million. Unlike “ regular” sales
tax revenues, which are based on retail activity in Fremont, Prop. 172 is
collected statewide, so annual changes more closely resemble the state-wide
retail economy. For FY 2006/ 07, the statewide sales tax revenues are
projected to grow by 5%, so the Prop. 172 component of the City’s sales
taxes are projected to be $ 1.4 million. Annual growth or decline in Prop.
172 sales taxes are the final component of the total sales tax projection.
The graph below displays the sales tax forecast. In FY 2004/ 05, the City
began to receive “ triple flip” property tax payments. The darker bars on
the graph represent traditional sales tax dollars ( including Prop. 172 revenue),
and the gray portion of the bars represent property tax dollars the City is
receiving in lieu of sales taxes under the “ triple flip.”
Key Factors in the Forecast: The FY 2006/ 07 sales tax revenue budget
( including the “ triple flip” property tax reimbursements) remains $ 1 million
less than the $ 34.5 million in actual FY 2000/ 01 sales tax revenues. The
Business and Industry segment includes most business- to- business activity
and remains the largest segment of the sales tax pie. This segment grew
from 30% of the tax base in FY 1990/ 91 to 41% in FY 2000/ 01. The high-
Sales Tax History and Forecast
( FY 1995/ 96 - FY 2007/ 08, excluding one- time effects)
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
95/ 96
96/ 97
97/ 98
98/ 99
99/ 00
00/ 01
01/ 02
02/ 03
03/ 04
04/ 05
05/ 06
06/ 07
07/ 08
$ Millions
FY 2006/ 07 projection= $ 33.5 M
FY 2006/ 07 projected change= 6.7%
City of Fremont 2006/ 07 Adopted Operating Budget
64
General Fund Revenues
tech sector recession that began in 2001 continues to dampen business- to-business
sales levels. For FY 2005/ 06, it will only constitute about 29% of
the sales tax base. This City revenue remains vulnerable to any weakness
in the Silicon Valley economy. The City’s largest sales tax segments are
highlighted in the following graph.
}
Since the peak year of FY 2000/ 01, revenue from the Business and Industry
sector has decreased by one- third, or approximately $ 4 million. Most other
retail categories have been stable or have increased modestly. The FY
2006/ 07 budget assumes that the economy will

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1
2006/ 07 Adopted Operating Budget
City Council
Bob Wasserman, Mayor
Steve Cho, Vice Mayor
Dominic D. Dutra, Councilmember
Bob Wieckowski, Councilmember
Anu Natarajan, Councilmember
Executive Management Team
Fred Diaz, City Manager
Harvey E. Levine, City Attorney
Christine Daniel, Deputy City Manager
Melissa Stevenson Dile, Deputy City Manager
Dawn Abrahamson, City Clerk
John Bjurman, Information Systems Director
Nancy Carlson, Human Resources Director
Harriet Commons, Finance Director
Daren Fields, Economic Development Director
Annabell Holland, Parks & Recreation Director
Norm Hughes, City Engineer
Jill Keimach, Community Development Director
Bruce Martin, Fire Chief
Jim Pierson, Transportation & Operations Director
Jeff Schwob, Planning Director
Suzanne Shenfil, Human Services Director
Craig Steckler, Chief of Police
Elisa Tierney, Redevelopment Director
Budget Team
Jim Becklenberg, Budget Manager
Ray Durant, Assistant Finance Director
Don Dorman, Management Analyst II
Tricia Fan, Senior Accountant
Lisa Goldman, Intergovernmental Relations Manager
Kim Pedersen, Executive Assistant/ Graphic Artist
2
The Government Finance Officers Association
of the United States and Canada ( GFOA)
presented an award for Distinguished
Presentation to the City of Fremont
for its annual budget for the fiscal
year beginning July 1, 2005.
In order to receive this
award, a governmental unit
must publish a budget
document that meets
program criteria as a policy
document, as an operations
guide, as a financial plan
and as a communications
device.
The award is valid for a period
of one year only. This is the
eighth consecutive year the City
has earned the award. We believe
our current budget continues to
conform to program requirements.
Acknowledgments
Putting together a budget requires a great deal of effort from many people.
The City Manager and Budget Team would like to thank the Budget and
Accounting Services Staff, Department Budget Coordinators and others
for their invaluable assistance:
Department Budget
Coordinators
Susan Aro
Cheryl Bourne
Charlie Caulfield
Catherine Chevalier
Budget and Accounting
Services Staff
Corina Campbell
Gloria I. del Rosario
Krysten Lee
Tish Saini
Ellen Zhou
Kelly Morariu
Dan Schoenholz
Kelly Sessions
Karena Shackelford
3
Guide to the Document
! Table of Contents ............................................................................... 3
! Guide to the Document ...................................................................... 5
Budget Overview
! Budget Overview ............................................................................... 7
Summary Information
! Citywide Organization Chart ............................................................ 17
! City of Fremont Profile .................................................................... 19
! All City Funds Schedule ................................................................... 23
! Citywide Position Changes ............................................................... 25
! City Debt Summary .......................................................................... 27
! Gann ( Appropriation ) Limit ............................................................. 31
! Citywide Goals and Objectives ........................................................ 33
General Fund
! Fund Overview ................................................................................. 39
! Fund Revenues ................................................................................. 57
! Forecast ............................................................................................ 71
! Transfer Detail ................................................................................. 72
! Historical Comparison ...................................................................... 73
Other Funds
! Other Funds ...................................................................................... 75
! Cost Centers & Internal Service Funds ........................................... 77
! Special Revenue Funds .................................................................... 87
! Redevelopment Agency Funds ......................................................... 93
! Capital Funds .................................................................................... 97
Capital Budget Summary
! Capital Budget Summary ............................................................... 101
Department Budgets
! City Council ..................................................................................... 111
! Community Development ................................................................ 113
! Economic Development .................................................................. 119
! Fire ................................................................................................. 123
! Housing & Redevelopment ............................................................ 129
• Redevelopment Agency Project Highlights ............................... 131
Table of
Contents
4
! Human Services ............................................................................. 137
! Parks & Recreation ....................................................................... 143
! Police .............................................................................................. 147
! Transportation and Operations ....................................................... 153
! Administrative Departments ........................................................... 159
• City Manager............................................................................. 161
• City Attorney ............................................................................. 163
• City Clerk .................................................................................. 167
• Finance ...................................................................................... 169
• Human Resources ..................................................................... 171
• Informations Systems ................................................................ 173
Staffing
! Permanent Position Summary ........................................................ 175
Policies & Glossary
• Policies and Practices ............................................................... 181
• Glossary of Budget Terms ......................................................... 201
Resolutions
• City of Fremont Budget Adoption Resolution ............................ 207
• Appropriations Limit Resolution ................................................. 211
• Fremont Redevelopment Agency Budget Resolution ................ 213
Table of Contents
5
Guide to the
Document
The budget is both a spending plan for the City’s available financial resources
and the legal authority for City departments to spend the resources for
public purposes. Through these resources, services are provided to meet
the needs of Fremont residents. The City Council and City staff respond to
the community’s needs in part through the budget. It balances not only
revenues and costs, but also community priorities and interests.
Document Organization
Budget Overview
The City Manager’s Budget Overview sets the context for budget decisions
by describing community and economic conditions affecting the budget. It
outlines major initiatives underway and challenges for the coming year.
Summary Information
This section of the document presents an overall picture of the City and the
budget. It includes a description of the community, an organization chart,
summary financial tables, a summary of Citywide staffing changes
associated with the budget, and documentation of the City’s compliance
with State statutes and City policies regarding total expenditures and debt.
The section also presents a summary of departmental service objectives in
a table that shows objectives’ alignment with citywide goals.
General Fund
Local government budgets are organized by funds in order to segregate
and account for restricted resources. Each fund is a separate accounting
entity. The General Fund provides the majority of resources for most of
the services cities typically provide, including the public safety, maintenance,
and general government functions required to support direct services to the
community. This section provides an analytical overview of the General
Fund for the budget year. This section also places the budget in context
with the financial forecast and provides a five- year historical review of
General Fund sources and uses.
Other Funds
The Other Funds section contains information regarding non- General Fund
sources of revenue. These funds are grouped into Cost Centers and Internal
Service, Special Revenue, Redevelopment Agency, and Capital categories.
Internal Service funds are described in governmental accounting literature
as “ proprietary funds.” Special Revenue funds ( which include the Cost
Center funds) and Capital funds are grouped in the literature with the General
Fund and debt service funds and are described as “ governmental funds.”
The distinction between how the budgeted resources are accounted for in
proprietary funds as compared to governmental funds is discussed in the
“ Basis of Budgetary Accounting” located in the Policies and Practices
section of the document. A description and financial summary is provided
for each category of Other Funds within the budget.
Capital Budget Summary
The Capital Improvement Program/ Integrated Capital Assets Plan ( CIP/
ICAP) is adopted biannually and includes appropriations for projects for
Fiscal Years 2005/ 06 and 2006/ 07. Selected excerpts from the Plan are
City of Fremont 2006/ 07 Adopted Operating Budget
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Guide to the Document
included with the operating budget to present a comprehensive picture of
all the funds of the City and to reflect fund transfers approved between
other operating funds and capital funds. This section contains a description
of the CIP/ ICAP funds, a summary of approved expenditures by program
category, and highlights of key projects for the current fiscal year.
Department Budgets
The majority of the budget document presents information on departmental
budgets. Each departmental section provides the following information:
• Department Mission Statement
• Description of Responsibilities and Services - The purpose of this
paragraph is to give the reader an understanding of the scope and
breadth of each service area’s ongoing functions and responsibilities.
• Service Objectives - A list of yearly department objectives aligned
with the Council’s goals.
• Sources of Funding - This information is in graphic form and illustrates
the funds from which departments receive financial resources.
Interfund transfers ( to the General Fund) cover administrative
department costs that are not funded by the General Fund. This
contribution is shown on the charts as “ overhead charges to other funds.”
• Expenditure Summary - This table provides the salary and benefits,
operating, and capital costs associated with the department for the fiscal
year. It also provides historical information and trends of previous
funding levels.
• Major Budget Changes - A description of the major budget changes is
included that compares the previous year’s budget with that for the
current year.
• Staffing - A historical staffing graph shows the level of staffing for
each area. Trends are easily identified. In addition, an organization
chart displays individual positions and titles.
Departments comprised of mulitiple, discrete, service areas also present a
table summarizing their activities by those major service areas.
Staffing
This section contains a summary of authorized positions by department and
provides perspective on workforce trends.
Policies
This section details the City’s budget and financial policies.
Resolutions
This section contains resolutions approving and adopting the City budget,
the Redevelopment Agency budget, and the appropriation limit for the fiscal
year.
7
Budget Overview
The City of Fremont, as seen from the Ohlone Wilderness Trail at the
base of Mission Peak
Honorable Mayor and Members of the City Council:
Executive Summary
Like many cities in California, the City of Fremont continues to face an
uncertain economic future. Years of State takeaways of City dollars, coupled
with a serious recession in the early years of this decade, have taken their
toll on the City’s finances. With the $ 130.5 million FY 2006/ 07 budget,
expenditures will once again exceed revenues, no fund balance will remain
at the end of FY 2006/ 07, and we are projecting some use of the Budget
Uncertainty Reserve. In addition, this budget does nothing to address the
City’s significant service deficit.
The City has been fiscally responsible during this multi- year budget crisis
by reducing spending throughout the organization and by focusing on
attracting and retaining retail in order to increase revenue. Unfortunately,
this fiscal responsibility has come at great cost to the City organization and
to the larger Fremont community, which relies on the City to provide a
broad range of services at excellent levels.
Several years ago, the City cut costs by more than 25% and cut staff by
more than 20%, or more than 220 positions. The consequences of these
reductions have been severe. We cut our crime prevention efforts, dropped
our response to low- priority police calls, and reduced the Police Department’s
traffic unit. We closed a fire station on the west side of town and
implemented rotating station closures at four other stations in order to reduce
overtime costs. We deferred repairing our streets, thereby increasing our
pothole problem and, unfortunately, ensuring that we will have to perform
more expensive maintenance in the future. We eliminated all support for
supplemental hours at the four Fremont libraries, and we eliminated park
events like the summer concert series. We also had to postpone the
construction of a new senior center, even though the number of seniors in
Fremont is increasing dramatically.
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Budget Overview
It’s clear that the City cannot continue on this path. Although revenues are
increasing in some areas, and the City continues to constrain its spending,
the FY 2006/ 07 budget does nothing to restore the health of the community.
In fact, our projections show that we will still outspend our revenues by
$ 1.6 million in the 2006/ 07 fiscal year, preventing us from restoring much-needed
services in the police, fire, and maintenance areas.
For that reason, we are continuing our ongoing dialogue with the community
about what the right service levels are, and how we can achieve those
levels now and in the future.
Community Outreach and the Budget
The City of Fremont incorporated just over 50 years ago, on January 23,
1956. The vote to incorporate occurred after months of hard work by a
group of engaged and involved community members. These leaders
recognized that five small towns could never be as strong as one larger,
incorporated city, and they worked tirelessly to ensure the City’s future
success.
That spirit of civic engagement lives on in Fremont, a city where people
volunteer their time in so many ways to help their community. A look at
today’s Fremont shows thriving service clubs, business associations, ethnic
and cultural organizations, homeowners associations, youth athletic leagues,
historical societies, PTAs, arts organizations, and more.
In fact, Fremont residents and business members are so interested in helping
this community that a group of them stepped forward over a year ago to
organize and plan Fremont’s 50th anniversary when the City was financially
unable to do so. The organization they formed, Celebrate Fremont, hosted
a successful gala and open house in January 2006, and they are planning a
months- long series of events, culminating in a community- wide celebration
of Fremont’s anniversary in September 2006.
Many of these dedicated community members are also involved in helping
with the City’s outreach efforts regarding the budget and City services. In
early 2005, after the City’s utility users tax failed to garner a majority of
votes in November 2004, City staff began a comprehensive community
outreach program designed to hear from Fremont residents and business
community members about their priorities, needs, and ideas for addressing
the City’s fiscal and community service challenges. As a first step, the City
conducted a poll of residents in April 2005. The goal of the survey was to
assess public attitudes toward a variety of issues the City is currently facing
with regard to services and finances. The main finding of the survey was
that Fremont residents and business community members want to ensure
that the City maintains a broad range of services at excellent levels. More
specifically:
• A majority of residents see “ some need” for additional funding for
public safety, libraries, and street and road maintenance in Fremont.
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Budget Overview
Police Department buildings as seen from Central Park
• Three quarters are at least “ very concerned” that the City receives far
less revenue than surrounding cities.
• The highest priorities, should additional funding become available, include
fixing streets and repairing potholes, preventing the elimination of
programs that work with police and schools to help keep at- risk kids
from getting into trouble, providing follow- up to cases of domestic
violence, and hiring, training, and retaining additional police officers
and firefighters.
With the survey results in hand, we formed an ad- hoc Community Task
Force, comprised of Fremont residents and business owners, to help us
develop a fiscally responsible plan for the City. The Task Force had several
purposes: help facilitate communication with residents and groups within
the community, share information about the City’s priorities, and provide
feedback on how to address the City’s needs and priorities. At the first
meeting, we discussed with the Task Force members the idea that a revenue
measure might be considered at the end of the process. However, we
assured them that we were not presupposing an end result of our outreach
efforts, but rather identifying possible outcomes.
In October, several members of the Community Task Force increased their
commitment even further by forming a Speakers Bureau. Members of the
Speakers Bureau, accompanied by City staff who helped answer technical
questions, met with a wide array of diverse community groups and
stakeholders, with the goal of assessing neighborhood priorities and evaluating
community feedback. Those meetings, plus an interactive mailer we sent
out to the community asking people to prioritize City services, a similar
form on our website, and articles in the Citywide newsletter, generated
more than 3,000 responses from members of the Fremont community.
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Budget Overview
At the five Community Task Force meetings held so far, we discussed the
feedback Task Force members were hearing at the Speakers Bureau
presentations and out in the community. We also shared with them some of
the consequences of the budget reductions we’ve had to make over the
years.
In the Police Department, for example, we’ve had to reduce the number of
personnel from an authorized high of 337.75 in FY 2002/ 03 to our current
authorized level in FY 2005/ 06 of 294.00. For FY 2006/ 07, the authorized
staffing level remains at 294.00, with 188 sworn police officers and 106
non- sworn personnel. This staffing level gives us a ratio of .89 officers per
1,000 residents, which is the lowest per capita staffing level of any city in
the area and considerably lower than the Alameda County average of 1.37
officers per 1,000 residents.
Unfortunately, along with the reductions in personnel, we’ve also seen an
increase in crime rates. In the last five years, crime rates have risen, with
violent crime up 32% and auto thefts up 50%. According to a nationally
recognized annual crime report by Morgan Quitno Press, Fremont was the
23rd safest city in the year 2000 among cities with a population above 75,000.
The latest report revealed that Fremont has slid to 59th in the rankings.
While a higher staffing level would not solve all of our crime problems, we
know that policing can be more proactive with more officers, and that more
proactive police work is one of the keys to preventing crime.
The budget reductions in the Fire Department, coupled with more calls for
service, are translating into slower response times to fire and medical
emergencies. The Fire Department’s goal is to respond to almost all calls
within 5 ½ minutes. In the years since the City closed a fire station and
implemented rotating station closures, the Fire Department has not been
able to achieve this standard.
In fact, since 2003, the demand for service has increased ( call volume is up
10% since 2003) and response time has continued to slip. In 2003, the Fire
Department responded to 90% of all calls within 6 ½ minutes, while in
2004, the Department responded to 90% of all calls within 7 ½ minutes. By
2005, the response time for 90% of all calls had increased to 8 ¾ minutes.
The Fire Department’s response time is also hindered by Fremont’s large
land area relative to its number of fire stations. Fremont has 10 fire stations
covering 92 square miles, and on any given day, one of them may be closed
as a money- saving measure. For comparison, the City of Santa Clara also
has 10 fire stations, but only 19 square miles to cover.
Lack of maintenance of the City’s streets, trees, parks, and buildings is
perhaps the most visible consequence of the City’s cutbacks over the last
several years. While people may not notice reductions in the Police and
Fire Departments unless they experience a crime, fire, or medical emergency,
everyone travels on the City’s roads, and everyone can feel the result of
budget reductions. The most obvious signs of deteriorating streets are the
numerous potholes the City is unable to fill, and the rougher ride on many of
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Budget Overview
Irvington District
the streets. The State restored Proposition 42 ( sales tax on the gas tax)
funding for FY 2005/ 06 after several years of takeaways, but the City is
still unable to keep up with its street maintenance needs. Even with the
additional $ 879,000 in Proposition 42 funding for FY 2005/ 06, the City faces
an annual gap in the pavement maintenance budget of about $ 5 million.
The City also maintains 46,000 street trees. Several years ago, crews
were able to trim trees on a seven- year cycle. The City now has fewer
maintenance staff, and they must focus on critical repairs first. For this
reason, the tree- trimming cycle has stretched from seven years to 20 years,
which will lead to more risks of fallen tree limbs and poorer appearance.
The City also has aging park equipment. Since there is not enough staff to
keep up with park equipment and playground repairs, staff often has to
remove equipment to prevent safety risks, when they otherwise would repair
or replace it.
Unless more money is invested in maintaining the community’s physical
infrastructure, these assets will continue to deteriorate, and they will be
much more expensive to repair in the future.
Pursuing Fiscal Health
The Community Task Force will meet at least one more time; at that meeting,
they will discuss whether they believe the City should move forward with a
finance measure in November 2006. Staff has still not made any
recommendations to the City Council about whether or not to proceed with
a revenue measure or continue with the outreach process for another year
or longer.
In the meanwhile, the City is pursuing a number of economic development
opportunities. While any positive changes in the economy will not be great
enough to overcome the very large gap in services we face, an improving
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Budget Overview
revenue picture will keep us from losing further ground. For that reason,
we are continuing to move forward on a number of revenue- generating
fronts.
Capitol Avenue/ Mixed- Use Retail Project: The Capitol Avenue project
is an exciting, high- end, retail- focused development that will be a catalyst
project for further development of the City’s Downtown. The project will
include the extension of Capitol Avenue to Fremont Boulevard and
encompasses both portions of Fremont Plaza and the City’s seven- acre
property adjacent to State Street.
The City has partnered with Tribeca Company, the owners of Fremont
Plaza, and Blake Hunt Ventures to develop approximately 200,000 square
feet of ground- level shops and restaurants and several hundred residential
units located above the retail and parking structures. The retail component
will be focused on providing a Main Street- style, pedestrian- friendly upscale
retail environment with a large public plaza in the middle of Capitol Avenue,
providing a focal point for a diverse array of programming and public events.
In March, the City Council reviewed a scale model of the Capitol Avenue
project and expressed excitement about the prospects for the project. Staff
will be engaging in formal development agreement negotiations with the
co- developers over the next six to nine months.
Pacific Commons: Pacific Commons is a 700,000- square foot retail center
located at I- 880 and Auto Mall Parkway. The first stores at Pacific
Commons opened in October 2004, and the center has thrived ever since,
bringing in additional sales tax dollars. When the center is completely built
out, we expect to receive approximately $ 1 million of additional sales tax
revenue each year. Some of the businesses at Pacific Commons include
Costco, Lowe’s, Circuit City, Bassett Furniture, Kohl’s, Old Navy, and In-
N- Out. Both Claim Jumper and PF Chang’s China Bistro will be opening
restaurants there within the next year.
The nearby Fremont Auto Mall has also proven to be a success. During
the past year, a new Land Rover/ Volvo/ Jaguar dealership opened and
construction began on a new expanded site for the existing Lexus dealership.
The Toyota dealership is also undergoing a major expansion. Finally, within
the upcoming year, an additional new dealership will be coming to the Auto
Mall where the existing Lexus dealership is now.
Biotech: Fremont’s life science community has also grown in the past
year. Four new firms ( Aryx Therapeutics, RITA Medical Systems,
AngioScore, and Dynatherm) located in Fremont, while Genitope leased
220,000 square feet of space in Ardenwood for its headquarters and new
manufacturing facility. The company expects to open in August 2006. In
addition, construction is slated to begin later this year on a new 118,000
square- foot biotech facility in Ardenwood. These new businesses strengthen
and diversify the local business base and will eventually add over 500 new
jobs to Fremont.
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Budget Overview
Mission Peak with a rare dusting of snow, as seen from one of the
trails to the top.
Major League Baseball: In 2005, the City first began hearing rumors that
the Oakland Athletics ( the A’s) might be interested in moving out of Oakland.
The A’s owner, Lew Wolff, was then in negotiations with the City of Oakland
regarding relocating to a new baseball stadium. Mr. Wolff wants to build
not only a new stadium, but also a baseball village that would include
residential units and retail. With the City of Oakland potentially unable to
find a suitable location for this baseball village, Mr. Wolff began looking
elsewhere in Alameda County for a site. Mr. Wolff contacted the City and
began discussions with private landowners about the possibility of relocating
to Fremont. While the A’s may not make any decisions about relocating
until the end of the baseball season in October, this is an exciting opportunity
for Fremont. Staff will be working diligently with representatives of the A’s
over the next several months to ensure that any new baseball village brings
in adequate revenues to support any increased costs to the City.
Redevelopment: There are a number of exciting redevelopment projects
underway. All of these projects will help revitalize the Redevelopment
Project Areas and bring new revenue into Fremont.
Centerville: The largest investment underway in the Centerville
Redevelopment Project Area is the Centerville Market Place project.
Located on a 6.6- acre site along Fremont Boulevard near Thornton Avenue,
the Centerville Market Place is a public/ private partnership between Charter
Development and the Redevelopment Agency. Once completed, the mixed-use
project will include approximately 58,000 square feet of retail space
along Fremont Boulevard, a new street connecting Fremont Boulevard to
Post Street, and 110 for- sale townhome- style condominiums located above
the retail shops.
The Redevelopment Agency completed the demolition of all buildings and
site remediation last year. The groundbreaking is scheduled for 2006, and
the grand opening will occur in late 2007 or early 2008. Once open, the
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Budget Overview
Centerville Market Place is expected to set a new development standard
for Centerville and serve as an economic catalyst for the area.
Irvington: The Washington Boulevard and Paseo Padre Parkway Grade
Separation is the largest redevelopment project in the Irvington district.
This $ 96 million project, which will build an overpass on Washington
Boulevard and an underpass on Paseo Padre Parkway to separate car,
bicycle, and pedestrian traffic from railroad crossings, is described in detail
in the Capital Projects section of this overview.
The Bay Street Streetscape and Parking Project is one of the cornerstones
for Irvington’s revitalization. The project was developed with the intent of
transforming the street environment for this three- block stretch of Bay
Street to support existing, and create new, commercial and residential mixed
uses, as well as other public and private investments in and around the Five
Corners in Irvington. Since its approval in 2004, project implementation
has faced some challenges. As a result, modifications that will revise the
plan for public parking, reduce the right- of- way requirements for street
improvements, and extend street improvements to include Papazian Way
and Trimboli Way are being considered. Staff has engaged the community
in a discussion about the proposed modifications and will be reporting back
to Council in June. If the revised project is approved, construction could
begin following utility undergrounding by PG& E, scheduled for the summer
of 2007.
In addition, the Redevelopment Agency is considering ways to work with
the property owners of the Monument Center Shopping Center properties
located on Fremont Boulevard at the Five Corners intersection. In early
2003, as a result of the State budget crisis and the impending shift of
redevelopment funds to the State, the Redevelopment Agency put plans for
Monument Center on hold. The project will be reactivated next year. During
2006/ 2007, staff will be working with the property owners to assess their
interest in development opportunities for the site.
In the housing arena, the Redevelopment Agency provided assistance to
the now- completed Bridgeway Expansion project, 18 transitional and
permanent homes on Bay Street for very low- income residents. The Agency
is now working with Bridge Housing Corporation, the developer for the
Irvington Family Apartments. Located on the former Tri- City Patio World
site, the Irvington Family Apartments will provide 100 affordable apartments
for families and individuals. Construction began in December 2005, and
completion is expected in the summer of 2007. The Agency is also assisting
the Lincoln Avenue Apartments, which will provide housing for 11 families
with developmentally disabled members. Completion is expected in the
summer of 2006.
Niles: The 138- acre Niles Redevelopment Project Area is located at the
western edge of Niles Canyon, near the intersection of Niles and Mission
Boulevards. For the past several years, Redevelopment Agency staff has
been working with the community on the development of the Niles Town
Plaza.
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Budget Overview
Fremont from the air, with Mission Peak and San Francisco Bay
Located on the north side of Niles Boulevard on an approximately two-acre
portion of the former UP Property, at H and I Streets, the $ 3.9 million
Town Plaza will include landscape improvements, a water feature, and an
amphitheater and stage area. Once constructed, the plaza will act as an
anchor for what could ultimately be a two- story Main Street- style
development that will turn Niles Boulevard into a more typical two- sided
commercial street. Environmental remediation of the property is scheduled
to occur later this year, and groundbreaking on the Town Plaza is slated for
summer 2007.
Capital Projects: Despite the problems in the City’s General Fund, we
are continuing to work on a variety of major capital projects. These projects
can proceed because they do not rely on the City’s General Fund. Rather,
their funding comes from such sources as redevelopment, traffic impact
fees, State and regional sources, and the Recreation Cost Center’s operating
reserve.
Grade Separation Project: The $ 96 million Grade Separation Project in
the Irvington District is the largest public works project undertaken in the
City’s history. The project includes building an overpass on Washington
Boulevard between Bruce Drive and Roberts Avenue and an underpass on
Paseo Padre Parkway between Shadowbrooke Common Road and
Hancock Drive to separate car, bicycle, and pedestrian traffic from railroad
crossings. The project also includes the relocation of about one and a half
miles of the active Union Pacific ( UP) railroad tracks up to 500 feet to the
east of where they are now in the area between Paseo Padre Parkway
and Washington Boulevard.
The Grade Separation Project will benefit Fremont in a number of ways.
First, it will facilitate the future BART extension to Warm Springs and San
Jose by allowing the BART trains to travel at grade once they emerge from
underneath Central Park and Lake Elizabeth. Keeping the trains at grade
is both less expensive for BART and less disruptive for residents and
businesses near the BART tracks. Second, the project will improve safety,
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Budget Overview
reduce traffic delays, and eliminate the need for freight trains to sound
their horns when approaching and crossing Washington Boulevard, High
Street, Main Street and Paseo Padre Parkway ( the train crossings at High
and Main Streets will be eliminated by the relocation of the UP tracks). In
turn, eliminating traffic backups at train crossings will help reduce cut-through
traffic on neighborhood streets and improve safety in the area by
separating vehicles from the railroad tracks.
The Grade Separation Project was originally projected to cost approximately
$ 75 million. However, escalating construction costs have increased the
price tag to about $ 96 million. The City has committed $ 37.7 million in
redevelopment funds and traffic impact fees to the project and has secured
about $ 37 million in additional funding from the State and regional sources
like the Alameda County Congestion Management Agency ( CMA), bridge
tolls, and the County’s Measure B half- cent sales tax. Because this project
is the first, necessary step in bringing BART to Warm Springs and San
Jose, City staff spent much of the spring meeting with officials from the
Metropolitan Transportation Commission, BART, the CMA, the Silicon
Valley Leadership Group, and the Santa Clara Valley Transportation
Authority to discuss alternate funding strategies to make up the anticipated
$ 21.1 million funding shortfall. At this time, it appears likely that full funding
will be secured by the time the project is advertised for construction bids in
the fall of 2006.
Family Water Play Facility: The City is building a Family Water Play
Facility at the former Puerto Penasco Swim Lagoon in Central Park. The
facility will include a lazy river, water slides, a pool, play areas for young
people, picnic areas, a food concession, and a science lab for environmental
education programs.
The total estimated cost of the project is $ 10 million. The majority of the
funding will come from the Recreation Operating Improvement Reserves,
State Proposition monies, and Park Development funds. In addition, the
Fremont Bank Foundation has announced its intent to provide $ 1 million for
the project, while the Candle Lighters are donating $ 75,000. No General
Fund monies are being used in this project. Once open, the Water Play
Facility will be a financially self- sustaining operation that will cover its own
costs.
Conclusion
Fifty years after the City’s incorporation, we now find ourselves in a difficult
position. Our residents and business community members want the City to
provide a broad range of services at excellent levels, but we lack sufficient
funds to carry out their wishes. We will continue to work in partnership
with the community to determine what the appropriate services are for
Fremont and how to pay for those services. Together, we will develop a
fiscally responsible plan for Fremont.
Fred Diaz
City Manager
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Fremont Community
Commissions City Council Boards
City Attorney City Manager
City of Fremont Organization Chart
Fiscal Year 2006/ 07
Deputy
City Manager
Parks &
Recreation
Director
Deputy
City Manager
City Clerk
HumanResources
Director
Chief Information
Technology Officer
Transportation &
Operations
Director
Environmental
Services
Manager
Maintenance
Manager
Economic
Development
Director
Finance Director
Fire Chief
Human Services
Director
Police Chief
Community
Development
Director
Building &
Safety
Manager
City Engineer
Housing &
Redevelopment
Director
Planning
Director
18
The City of Fremont, fifty years ago ( 1956)
Niles
Irvington
Centerville
Mission San Jose
Warm Springs
19
History
Fremont’s rich heritage can be traced to the Ohlones, natives of the land,
and to the Spanish priests who established Mission San Jose, the first Spanish
mission located inland. Since those early days, Fremont’s rich soil, central
location, and excellent climate have continued to attract newcomers to this
area. In the mid- 1840s, John C. Frémont mapped a trail through Mission
Pass to provide access for American settlers into the southeastern San
Francisco Bay Area. During the Gold Rush era, the Mission area attracted
miners headed for the California gold fields. Governor Leland Stanford
acquired land in the Warm Springs area, where he planted vineyards and
built one of the first wineries in the state. The Niles district made history
when the last tracks needed to connect the transcontinental railroad were
laid there. Further acclaim came to Niles when Charlie Chaplin filmed
“ The Tramp” at the Essanay Movie Studio there. In 1853, Washington
Township was established and included the communities of Mission San
Jose, Centerville, Niles, Irvington, and Warm Springs. On January 23, 1956,
these communities joined to form the City of Fremont.
Quality of Life
Fremont, located in southern Alameda County,
stretches from the San Francisco Bay to the
top of Mission Peak above historic Mission
San Jose in the east. With a population of
over 210,445, Fremont is the fourth largest city
in the San Francisco Bay Area and ranks 91st
among the most populous cities in the nation
according to the California State Department
of Finance. Fremont is approximately 92
square miles in size and includes the 450- acre
Central Park and 80- acre Lake Elizabeth,
along with 51 other parks, five community
centers, and extensive sports facilities.
Fremont is also home to the Don Edwards
San Francisco Bay National Wildlife Refuge,
adjacent to Coyote Hills Regional Park.
Fremont enjoys a high rate of home ownership,
a low crime rate, and a quality of life that is
considered to be one of the best in the United
States. For example, Fremont was rated as
the best place in which to raise healthy children in the nation, and Men’s
Health magazine rated Fremont # 1 in the nation for men’s health. Fremont
residents can expect a first- rate menu of local services, including a highly
rated public education system, excellent public safety program, and
recreation, park, and other leisure activities. In addition to beautiful parks
and extensive recreational facilities, Fremont is easily accessible to three
international airports, several major educational institutions, the Bay Area
Rapid Transit system, and professional sports and cultural opportunities.
Fremont is also home to Washington Hospital, a community asset for over
50 years.
City of Fremont
Profile
City of Fremont 2006/ 07 Adopted Operating Budget
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Profile
Government
Incorporated January 23, 1956
Fremont is a General Law Council/
Manager City governed by a five-member
City Council with a directly
elected Mayor, all elected at large.
Number of directly elected Mayors
( since 1978): 5
Number of City Managers since
Incorporation: 7
Full- time Employees
FY 2006/ 071
Community Development..... 106.42
Economic Development ........... 4.64
Fire………………................. 153.00
General Government…...…. 87.90
Human Services...….......….. 43.97
Transportation and Operations.. 112.90
Police………………….....… 294.00
Parks and Recreation……........ 67.35
Housing and Redevelopement.... 13.99
Total……………............... 884.17
Demographics
Land Area: 92 square miles
Population
1956…………...…………… 22,443
1960………….………..…… 43,634
1970………….….……..…. 102,321
1980…………...………….. 127,454
1990……………...……….. 173,116
2000………....……………. 203,413
20062 ................................... 210,445
Climate3
Average Temperature: 59oF ( 15oC)
Avg. Annual Precipitation: 13.6”
Level of Educational Attainment
of people 25 years and older4
College Degree……………… 43%
Associate Degree............…… 8%
Some College, no Degree…… 20%
High School Graduate……… 17%
Grades 9- 12 ( No Diploma)...… 7%
Less than 9th Grade………….. 5%
Median Age4: 35
Mean Household Income
( 2005 projection) 5: $ 100,500
Racial Composition4
Asian..........................……… 37%
African- American………….... 3%
White…...................……... 48%
O t h e r … . . . . . . . . . . . . . . . . . . . … … . . 6 %
Two or more....................……... 6%
( Hispanic/ Latino may be of any race)
Business
Major Employers, listed in order of
number of employees6
New United Motor Mfg. ( NUMMI)
Lam Research Corporation
MMC Technology
Office Depot
Solectron California Corp./ Fine Pitch
Sysco Food Services
Western Digital
Kaiser Permanente Medical Group
Sanmina- SCI
Scios Inc.
Zomax Incorporated
Abgenix Inc.
Therma Wave Inc.
Quanta Computer
Mervyn’s Distribution Center
Spectra Laboratories Inc.
Fry’s Electronics Inc.
Boston Scientific/ Target
Walters & Wolf Glass Co.
Elo TouchSystems, Inc.
Distribution of jobs by major
employment sectors ( 2005 projection) 5
Agriculture/ Nat. Resources……... 0.1%
Manufac./ Wholesale/ Trans.……. 40.9%
Retail………………………..... 9.9%
Financial/ Prof. Service................. 16.5%
Health/ Ed./ Recreation.…………. 22.6%
Other……………............… 10.0%
Total Jobs…………............… 96,530
City of Fremont 2006/ 07 Adopted Operating Budget
21
Profile
Services by Other
Governmental Units
Education: Fremont Unified School
District and Fremont- Newark
Community College District
Flood: Alameda County Flood
Control and Water Conservation
District
Parks: East Bay Regional Park
District
Public Transportation: Bay Area
Rapid Transit District, Alameda-
Contra Costa Transit District, ACE
Train, and Capitol Corridor Train
Sewer: Union Sanitary District
Gas and Electricity: Pacific Gas and
Electric
Water: Alameda County Water
District
Education
Fremont Unified School District
( FUSD) has 29 elementary
schools, 5 junior high schools, 5
high schools and a continuation
school.
FUSD Average SAT Score7: 1121
Percentage of FUSD graduates
attending8:
University of California: 19.4%
California State University: 13.6%
Ohlone College is a public, two-year,
open- admission community
college with an average
enrollment of 11,551 students per
semester. 9
Notes
1 FY 2006/ 07 Adopted Operating Budget, City of Fremont
2 California State Department of Finance
3 National Weather Service
4 U. S. Census 2000
5 Association of Bay Area Governments ( ABAG)
6 City of Fremont, Economic Development Department
7 Fremont Unified School District
8California Postsecondary Education Commission
9Ohlone College, Office of College Relations
Community Services
Family Resource Center: 1
Parks: 52
Senior Center: 1
Community Centers: 5
Fire Stations: 10
City of Fremont 2006/ 07 Adopted Operating Budget
22
23
The “ Summary of All Funds” schedule on the following page groups the
City’s funds into five categories:
! General Fund
! Cost Center/ Internal Service
! Special Revenue
! Redevelopment
! Capital
The first three categories include the City’s operating funds, and the last
two are special purpose fund categories. Funding for most of the City
operations and most of its services comes from the first three fund categories.
The Fremont Redevelopment Agency’s budget is adopted separately by the
City Council when it sits as the governing board of the Redevelopment
Agency. The budget for Capital funds is reviewed and adopted by the City
Council as part of the Capital Improvement Program/ Integrated Capital
Assets Plan ( CIP/ ICAP). The FY 2006/ 07 maintenance appropriations
were adopted when the City Council adopted the FY 2005/ 06 - 2009/ 10
CIP/ ICAP.
The “ Summary of All Funds” schedule consolidates all funds Citywide and
presents the total available resources and total use of resources, including
beginning fund balances, revenues, expenditures, “ transfers in,” and “ transfers
out.” This consolidation is achieved by eliminating all transfers between
funds that are within the same fund category and all internal service fund
charge transfers. Such eliminations are similar to those made to produce
the City’s government- wide financial statements, as mandated by GASB
34. These eliminations avoid the double counting that would otherwise occur
if these transactions were shown as either additional transfers or as additional
revenues and expenditures. Therefore, the “ Total Expenditures” and “ Total
Revenues” lines for all funds present the true budgeted expenditures and
revenues expected to be received and spent by the entire organization.
Please refer to the General Fund section and the Other Funds section
of this document for more information.
All City Funds
Schedule
City of Fremont 2006/ 07 Adopted Operating Budget
24
All City Funds Schedule
Note: Some internal charges between funds are classified as either transfers
or expenditures to clarify departmental budget resources and appropriations.
This results in minor differences between the individual departmental budgets
and amounts shown in the Summary of All Funds schedule above.
Summary of All Funds
Total Cost Center/ Special Total
General Internal Revenue RDA Capital All
( Thousands of Dollars) Fund Service Funds Funds Funds Funds Funds
Fund Balance - 6/ 30/ 06 ( est.) $ 33,551 $ 9 ,681 $ 18,144 $ 7 8,017 $ 18,934 $ 158,327
Revenues
Intergovernmental:
Property Taxes 41,325 - - 2 8,900 - 70,225
In- lieu VLF 13,798 - - - - 13,798
In- lieu Sales Taxes 8,084 - - - - 8,084
Sales & Use Taxes 25,418 - 761 - - 26,179
Vehicle License Fees 1,502 - - - - 1,502
Other Intergovernmental 646 9 9 5,678 - 5,485 11,908
Business Taxes 6,941 - - - - 6,941
Hotel/ Motel Taxes 2,486 - - - - 2,486
Property Transfer Taxes 2,006 - - - - 2,006
Franchise Fees 7,862 - - - - 7,862
Charges for Services 3,217 1 9,347 8,203 - 2,484 33,251
Fines 3,235 - - - - 3,235
Investment Earnings 2,783 2 92 13 1 ,461 1,367 5,916
Paramedic Fees 1,065 - - - - 1,065
Other Revenues 1,050 6 68 1,180 8 00 2,319 6,017
Total Revenues 121,418 2 0,406 15,835 3 1,161 11,655 200,475
Total Transfers In 7,528 6 ,096 182 - 35,412 49,218
Total Available Resources 162,497 3 6,183 34,161 1 09,178 66,001 408,020
Expenditures
General Government 12,061 - - - - 12,061
Police 48,575 - 1,093 - - 49,668
Fire 27,760 - 304 - - 28,064
Transportation and Operations - 1 ,590 7,869 - 18,042 27,501
Community Development:
Planning - 3 ,593 - - - 3,593
Building & Safety - 5 ,162 - - - 5,162
Engineering - 5 ,948 - - - 5,948
Community Preservation 668 - - - - 668
Housing and Redevelopment - - 385 5 4,402 - 54,787
Human Services 3,150 7 43 6,451 - - 10,344
Parks and Recreation - 5 ,788 - - 4,522 10,310
Non- departmental 2,555 ( 658) - - 5,108 7,005
Less: Citywide Savings ( 1,000) ( 1,000)
Debt costs 150 - 641 7 ,505 7,813 16,109
Total Expenditures 93,919 2 2,166 16,743 6 1,907 35,485 230,220
Total Transfers Out 35,350 6 ,979 813 2 50 5,826 49,218
Total Use of Resources 129,269 2 9,145 17,556 6 2,157 41,311 279,438
Fund Balance - 6/ 30/ 07 ( est.) $ 33,228 $ 7 ,038 $ 16,605 $ 4 7,021 $ 24,690 $ 128,582
25
Citywide Position
Changes
Overview
The total authorized permanent staffing level for the FY 2006/ 07 budget is
virtually unchanged from the FY 2005/ 06 level. Cautious budget planning
prompted by continuing economic uncertainty prevents the City from
restoring any of the 148.30 permanent positions eliminated since FY 2002/
03. Staffing levels for the most basic services — Police, Fire, and
Maintenance — remain at their lowest level in at least 17 years when
viewed in relation to Fremont’s population.
The authorized level of 884.17 full- time equivalent positions ( FTEs) is 0.43
FTE lower than the FY 2005/ 06 level of 884.60. The reorganization of the
Development and Environmental Services Department into two departments
— the Community Development Department and the Department of
Transportation and Operations — is the most significant organizational change
for FY 2006/ 07. The reorganization was accomplished by restructuring or
reclassifying several existing positions, without adding any new staff.
The decrease in net FTE positions is primarily attributable to the elimination
of a vacant Management Analyst position in the City Manager’s Office
and offsetting miscellaneous adjustments of existing positions. Additional
information on departmental staffing, along with organizational charts, may
be found in the departmental budget section of this document. Additional
discussion of citywide details may be found in the Staffing section of this
document.
Note: Historical staffing information reflects the current organizational structure.
Positions previously displayed in departments that were eliminated as part of the
FY 2006/ 07 reorganization ( Maintenance, and Development and Environmental
Services) have been redistributed to new departments ( Community Development,
Transportation and Operations, and Parks and Recreation) with the same
adjustments made to historical data to assist the reader with comparisons.
2001/ 02 2002/ 03 2003/ 04 2004/ 05 2005/ 06 2006/ 07
PUBLIC SAFETY
Fire 176.20 176.00 157.60 153.00 153.00 153.00
Police 337.75 337.75 292.90 299.10 294.00 294.00
TOTAL 513.95 513.75 450.50 452.10 447.00 447.00
OTHER COMMUNITY SERVICES
Community Development 128.70 129.60 103.32 102.90 105.10 106.42
Economic Development 6.00 4.70 3.64 4.75 4.64 4.64
Human Services 40.95 44.95 40.57 40.67 43.97 43.97
Transportation & Operations 129.10 137.10 115.60 116.15 113.40 112.90
Parks and Recreation 72.60 74.25 70.10 68.85 67.35 67.35
Housing and Redevelopment 16.05 17.35 13.04 14.68 14.54 13.99
TOTAL 393.40 407.95 346.27 348.00 349.00 349.27
ADMINISTRATIVE SYSTEMS
City Manager's Office 4.00 4.00 3.00 3.00 3.00 2.40
Administrative Systems Office 12.00 11.10 5.50 6.50 5.30 5.30
City Attorney 13.00 13.00 12.00 11.00 10.75 10.75
City Clerk 9.00 10.50 7.50 7.40 6.40 6.30
Finance 29.65 30.05 25.40 26.40 25.75 25.75
Information Systems 18.00 21.00 20.40 20.40 20.40 20.40
Human Resources 21.00 21.00 17.00 17.50 17.00 17.00
TOTAL 106.65 110.65 90.80 92.20 88.60 87.90
CITYWIDE TOTAL 1014.00 1032.35 887.57 892.30 884.60 884.17
City of Fremont 2006/ 07 Adopted Operating Budget
26
27
Cities have primarily three choices in financing their operations and funding
public facilities: pay- as- you- go, debt financing, and public- private ventures.
The City has adopted a Long- Term Capital Debt Policy that sets the
guidelines for issuing debt and provides guidance in the timing and structuring
of long- term debt commitments. The City will consider the issuance of
long- term debt obligations only under the conditions outlined in the policy
displayed in the Policies section of this document. Present and future planned
debt payments affecting the operating budget are detailed on the “ transfers
summary” located in the General Fund section of this budget.
The charts below summarize the City’s existing long- term debt and future
debt obligations related to that existing debt.
City Debt
Summary
An n u a l D e b t S e rv ic e R e q u irem e n ts
C ity ' s C ert ific ates
City ' s C ert ific ates of P art ic ipat ion - General
of P art ic ipat ion - S ou rc e o f P aym ent Obliga tion B onds
S ourc e of P aym ent Frem ont Res ourc e E lec t ion o f 2003 Tax A lloc at ion
G eneral F und Center S eries B B onds
FY 2006 / 07 $ 7 ,812 ,930 $ 641,343 $ 1 ,765,753 $ 7 ,504,521
FY 2007 / 08 7 ,837 ,260 642,993 1 ,761,403 7 ,498,856
FY 2008 / 09 7 ,936 ,496 652,008 1 ,756,353 7 ,498,596
FY 2009 / 10 7 ,913 ,912 656,465 2 ,251,678 7 ,496,286
FY 2010 / 11 7 ,920 ,692 660,397 4 ,737,153 7 ,487,881
The reaft er 132,890 ,373 1 2,965,907 50,902,898 24,652,641
T o ta l P rin cip a l &
I n te re st 172,311 ,663 1 6,219,113 63,175,235 62,138,782
Les s Int eres t ( 48,696 ,663) ( 5,129,113) ( 28,545,235) ( 8,773,782)
T o ta l P rin cip a l $ 123,615 ,000 $ 11,090,000 $ 34,630,000 $ 53,365,000
Debt Outstanding Fiscal Years Ending 2005 and 2006
2005 2006
Redevelopment Agency
Bonds, Series 2004 ( refi of 2000) $ 40,885,000 $ 37,345,000
Redevelopment Agency Taxable Housing Bonds 18,045,000 1 6,020,000
Total Tax Allocation Bonds $ 58,930,000 $ 53,365,000
General Obligation Bonds
General Obligation Bonds, Election of 2002 Series A $ 9,820,000 $ 9,630,000
General Obligation Bonds, Election of 2002 Series B 25,000,000 2 5,000,000
Total General Obligation Bonds $ 34,820,000 $ 34,630,000
City's Certificates of Participation - General Fund
1990 Public Financing Authority $ 4,900,000 $ 4 ,575,000
1991 Public Financing Authority 3,900,000 3,800,000
1998 Public Financing Authority 17,595,000 1 7,065,000
2001 Public Financing Authority 33,545,000 3 2,845,000
2001B Public Financing Authority 9,430,000 9,095,000
2002 Public Financing Authority 35,990,000 3 5,140,000
2003 Public Financing Authority 21,930,000 2 1,095,000
Sub- Total $ 127,290,000 $ 123,615,000
1998 Public Financing Authority
( Fremont Resource Center) $ 11,335,000 $ 11,090,000
Total Certificates of Participation $ 1 38,625,000 $ 134,705,000
Total Debt Outstanding $ 2 32,375,000 $ 222,700,000
City of Fremont 2006/ 07 Adopted Operating Budget
28
City Debt Summary
Compliance with Long- Term Capital Policy
The City of Fremont's Long- Term Capital Debt Policy, adopted by the City Council
on May 7, 1996, and revised and readopted with the CIP/ ICAP on July 8, 1998,
requires that General Fund supported debt service will not exceed 7% of total
General Fund budgeted expenditures and transfers out. With FY 2006/ 07
General Fund supported debt service of $ 7,812,930, and a debt level limit of
$ 9,137,800, the City has not exceeded its debt service limit.
Computation of Compliance with Debt Service Limit
Total General Fund Budgeted Expenditures and Transfers Out $ 130,540,000
Policy Debt Level Limit,
7% of Total Budgeted Expenditures and Transfers Out $ 9,137,800
Less General Fund Supported Debt Service 7,812,930
Policy Debt Margin $ 1,324,870
Legal Debt Margin
Under State law, the City has a legal debt limitation not to exceed 15% of the total
assessed valuation of taxable property within the City boundaries. In accordance
with California Government Code Section 43605, only the City's general obligation
bonds are subject to the legal debt limit. With only $ 34,630,000 of outstanding deb
subject to the legal debt limit and a legal debt limit of $ 3,923,849,381 the City is no
at risk of exceeding its legal debt limit.
Computation of Legal Debt Margin as of June 30, 2005
Assessed Valuation ( Net) 1 $ 26,158,995,876
Debt Limit: 15% of assessed value $ 3 ,923,849,381
Less Outstanding Debt ( Subject to Legal Debt Limit) 3 4,630,000
Legal Debt Margin $ 3 ,889,219,381
1 Source: Alameda County- Controller's Office Certification.
City of Fremont 2006/ 07 Adopted Operating Budget
29
City Debt Summary
Compliance with Long- Term Debt Policy
The City’s Long- Term Debt Policy limits General Fund- supported debt to a
maximum of 7% of total General Fund budgeted expenditures and transfers
out. The City has been in compliance with this policy since it was adopted
by the City Council in 1996. General Fund- supported debt has remained on
average 25% lower than the maximum debt allowance. The forecast for
long- term debt indicates that the City will remain in compliance and will not
exceed 7% of total General Fund budgeted expenditures and transfers out.
Over the next two years, the average General Fund- supported debt will be
$ 7.8 million. The forecasted 2- year average debt is 15% below the projected
debt limit; this compliance margin is lower than the average debt margin
over the past five years because of increases in the variable interest rates
on General Fund obligations and scheduled increases in principal payments.
Compliance with Long- Term Debt Policy
FY 2001/ 02 - 2007/ 08
5.3 5.6 6.5
4.4
7.0 7.8 7.8
2.9 1.0
3.6
1.5
1.3 1.5
3.1
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
FY 01/ 02 FY 02/ 03 FY 03/ 04 FY 04/ 05 FY 05/ 06 FY 06/ 07 FY 07/ 08
Years
$ Millions
General Fund Debt Service Future General Fund Debt Service Debt Policy Margin
City of Fremont 2006/ 07 Adopted Operating Budget
30
31
Gann Limit Article XIIIB of the California Constitution ( enacted with the passage of
Proposition 4 in 1979, with modifications under Proposition 111 passed
in June 1990 and implemented by California Government Code sections
7900, and following) provides the basis for the Gann appropriation
limitation. In brief, the City’s appropriations growth rate is limited to changes
in population and either the change in California per capita income or the
change in the local assessment roll due to new, non- residential construction.
The formula to be used in calculating the growth rate is:
% change in population + 100
100
times
either
% change in per capita income + 100
100
or
% change in non- residential assessed value + 100
100
The resultant rate times the previous appropriation limit equals the new
appropriation limit.
Both the California per capita personal income price factor and the population
percentage change factors are provided by the State Department of Finance
to local jurisdictions each year. Population percentage change factors
estimate changes in the City’s population between January of the previous
fiscal year and January of the current fiscal year. Reports that present
changes in new, non- residential assessed value are provided by the County
of Alameda. These numbers provide the basis for the factor to be used in
the City’s calculation of the Gann Limit. Of the two methods above, the
City is using the “ per capita personal income” factor because it results in
the higher appropriations limit.
On May 1, 2006, the State Department of Finance notified each city of the
population changes and the per capita personal income factor to be used in
determining appropriation limits. The calculation as applied to the City of
Fremont for 2006/ 07 is:
The population on January 1 of the previous year ( 209,421) compared to
the population on January 1, 2006 ( 210,158), is 737 or a 0.35% increase.
The change in per capita personal income is 3.96%.
The factor for determining the year- to- year increase is computed as:
0.35 + 100 X 3.96 + 100 = 1.0432
100 100
City of Fremont 2006/ 07 Adopted Operating Budget
32
Gann Limit
Applying this year’s factor of 1.0432 to last year’s limit of $ 399,287,215,
the Gann Limit for FY 2006/ 07 yields $ 416,536,423.
Based on an operating budget of $ 130,540,000, Fremont is not at risk of
exceeding the Gann Limit. The Gann Limit will be adopted by the City
Council concurrently with the adoption of the FY 2006/ 07 operating budget.
33
Citywide Goals
and Objectives
In 2002, the City Council adopted a Strategic Plan that outlines a vision for
the long- term future of Fremont and proposes strategies and short- term
goals for achieving the vision. The Plan has three main purposes. First, it
communicates the City’s vision for the future to residents, businesses, and
City employees. Second, it provides guidance so that decisions are good
for today’s challenges and good for the City in the future. Making decisions
in the context of a shared vision developed through collaboration ensures
broad commitment to the success of the plan. Finally, the Strategic Plan
provides a sound framework for long- term departmental planning.
For budgeting purposes, the long- term desired outcomes and values outlined
in the plan have been adapted as citywide goals that support the City
Council’s vision. The goals are used as a framework for ensuring alignment
of department service objectives with the City Council’s vision. This section
of the budget document presents the City Council’s vision and goals from
the 2002 Strategic Plan. It also includes a matrix that illustrates the alignment
of departmental service objectives with citywide goals. Service objectives
presented here may be abbreviated for format purposes. The full narrative
text for each objective is displayed in the departmental section of the budget
document.
City Council’s Vision
Fremont, in the Year 2020, will be a globally- connected economic center
with community pride, strong neighborhoods, engaged citizens from all
cultures, and a superb quality of life.
Citywide goals
1. Strong community leadership
City Council, Boards, and Commissions work with the community to create
the long- term vision for Fremont and provide policy direction and guidance
to the City organization. The City Manager and staff carry out the long-term
vision on a daily basis through a variety of services and activities.
2. A safe community
People value a feeling of safety and security within their community. In
Fremont, residents work together and with City staff to prevent crime and
solve problems in their neighborhoods.
3. A vibrant local economy
The local economy is comprised of a strong, diversified commercial and
industrial base, providing high- quality employment for the region. It is
balanced with a strong retail sector and healthy neighborhood commercial
districts.
City of Fremont 2006/ 07 Adopted Operating Budget
34
Citywide Goals
and Objectives
4. Thoughtful, orderly use of land and protection of environmental resources
The City values a harmonious blend of natural and physical environments,
with particular priority for preservation of open space, such as the hillface
and bay wetlands. Thoughtful land use and conservation also protect people’s
social and financial investments in the community.
5. Safe and effective transportation systems
Quality of life is highly dependent on high quality transportation systems,
which enable people to get around easily. Alternatives to automobile
transportation, such as walking, cycling, and public transit are also valued.
6. Public facilities and programs for recreation
Public facilities provide individual and family entertainment, relaxation, and
education. Fremont’s public amenities include parks, community centers,
historic estates, a golf course, and related programming.
7. Historic character
Preservation of historic properties, neighborhoods, and commercial districts
enables the community to adapt to change and embrace a progressive future
while remaining true to its heritage and historic character.
8. Building a caring community
Fremont is a community where members care for each other and value
services that help families and individuals to live self- sufficiently with a
respectable quality of life. The community values a range of housing
opportunities balanced with employment opportunities to ensure that people
who work in Fremont may also live here.
9. Strong families and healthy children
Fremont is proud of its identity as an excellent place for families and children.
The City partners with the school district and other agencies and groups to
foster growth in families and provide opportunities for youth development
and community involvement.
10. Involvement of a diverse population
Fremont is an inclusive community that welcomes people of all ages, ethnicity,
income, and background. The City believes that all segments of the
population must be engaged and involved in making community decisions in
order to ensure a high quality of life and effective democracy.
11. Effective and efficient city government
The Fremont community wants honest, responsive city government serving
the community’s interests with progressive, equitable, and fiscally responsible
service delivery.
39
General Fund
Summary
The General Fund is the City’s primary operating fund. It accounts for the
majority of financial resources and outlays for basic services such as police,
fire, and maintenance, as well as the administrative systems required to
support them. The fund also accounts for the City’s discretionary funding
sources ( e. g., property tax, sales tax, vehicle license fees, franchise fees,
and business tax). As a rule, General Fund resources are used only to fund
operations that may not be funded with other, restricted revenues. Operations
that rely heavily on non- General Fund resources, such as land development,
recreation, and human services, are accounted for in other funds.
Information on these operations may be found in the “ Other Funds” section
of this document.
Since mid- 2001, the City’s budgeting environment has been characterized
by tremendous uncertainty. The recession in the high- tech sector of the
economy and State resource takeaways caused a 10% decline in General
Fund revenues between FY 2000/ 01 and FY 2003/ 04. Meanwhile, the
demand for City services and the costs of providing them increased over
the same period. Because city governments may only spend available
resources, these factors combined to prompt budget and staffing reductions
of more than 20% since FY 2002/ 03. Budget reductions of this magnitude
necessarily resulted in service reductions in all areas. The “ Budget
Overview” section of this document provides more information on these
service reductions. This section provides information on the FY 2006/ 07
General Fund budget, including budget assumptions, expenditure and
revenue highlights, transfers to other funds, reserve funds, and the financial
forecast.
The FY 2006/ 07 budget displayed in the table on the next page continues
the City’s transition to a permanently lower revenue base. Despite modest
revenue recovery, the costs of providing services are projected to exceed
ongoing revenues in FY 2005/ 06 and FY 2006/ 07. The service reductions
that would be required to balance ongoing costs with existing ongoing
revenues in FY 2006/ 07 would be harmful to the community. Additionally,
economic signals are mixed, and community discussions about service
priorities and long- term revenue solutions continue. The City is relying on
one- time bridging resources, specifically undesignated fund balance and
the Budget Uncertainty Reserve, to balance the FY 2006/ 07 budget. For
this reason, the budget allows for no restoration of services or positions
that were eliminated in recent years. Although the economy has apparently
stabilized for the moment, there are not projected to be sufficient resources
in the future to fund more than the current, inadequate levels of service.
Only with significant new revenue will the City be able to provide the high-quality
public safety, infrastructure maintenance, and other services that
Fremont residents expect.
City of Fremont 2006/ 07 Adopted Operating Budget
40
General Fund Summary
NOTE: 1) The only General Fund costs displayed in this chart for Community Development are for Community Preservation. Other
department costs are displayed in the Other Funds section of this document. 2) Maintenance activities are funded in the Integrated
Capital Assets Plan and can be found in the Capital Funds section of this document. 3) Recreation activities are funded in the
Recreation Cost Center with a combination of General Fund and fee revenues. Department costs can be found in the Cost Center/
Internal Service section of this document.
General Fund
Program Budget Eliminating Total
General Contingency Investment Uncertainty Internal General
( Thousands of Dollars) Fund Reserve Reserve Reserve Transfers Fund
Fund Balance - 6/ 30/ 06 ( est.) $ 178 $ 15,100 $ 3,020 $ 15,253 n. a $ 33,551
Revenues:
Intergovernmental:
Property Taxes 41,325 - - - - 41,325
In- lieu VLF 13,798 - - - - 13,798
In- lieu Sales Tax 8,084 - - - - 8,084
Sales & Use Taxes 25,418 - - - - 25,418
Vehicle License Fees 1,502 - - - - 1,502
Other Intergovernmental 646 - - - - 646
Business Taxes 6,941 - - - - 6,941
Hotel/ Motel Taxes 2,486 - - - - 2,486
Property Transfer Taxes 2,006 - - - - 2,006
Franchise Fees 7,862 - - - - 7,862
Charges for Services 3,217 - - - - 3,217
Fines 3,235 - - - - 3,235
Investment Earnings 2,783 - - - - 2,783
Paramedic Fees 1,065 - - - - 1,065
Other Revenues 1,050 - - - - 1,050
Total Revenues 121,418 - - - - 121,418
Total Transfers In 8,944 1,059 212 - ( 2,687) 7,528
Total Available Resources 130,540 16,159 3,232 15,253 ( 2,687) 162,497
Expenditures -
General Government 12,061 - - - - 12,061
Police 48,575 - - - - 48,575
Fire 27,760 - - - - 27,760
Transportation and Operations - - - - - -
Community Development: -
Planning - - - - - -
Building & Safety - - - - - -
Engineering - - - - - -
Community Preservation 668 - - - - 668
Housing and Redevelopment - - - - - -
Human Services 3,150 - - - - 3,150
Parks and Recreation - - - - - -
Non- departmental 2,555 - - - - 2,555
Less: Cityw ide Savings ( 1,000) - - - - ( 1,000)
TRANS Debt costs 150 - - - - 150
Total Expenditures 93,919 - - - - 93,919
Total Transfers Out 36,621 - - 1,416 ( 2,687) 35,350
Total Use of Resources 130,540 - - 1,416 ( 2,687) 129,269
Fund Balance - 6/ 30/ 07 ( est.) $ - $ 16,159 $ 3,232 $ 13,837 n. a $ 33,228
City of Fremont 2006/ 07 Adopted Operating Budget
41
General Fund Summary
Budget Assumptions
In addition to the general conditions of revenue volatility and State budget
instability, the FY 2006/ 07 budget is premised upon the following specific
assumptions:
1. Service reductions implemented in the FY 2003/ 04 and FY 2005/
06 budgets continue, with no staff added back in FY 2006/ 07.
After the technology sector recession began to affect Fremont’s
revenues in 2001, the City took early action to align expenditures with
revenues. Department budgets were reduced by 10- 35%, with the
highest priority services of police, fire, and maintenance reduced least
( on a percentage basis) for FY 2003/ 04. Continued sluggish revenue
growth prompted another budget reduction in FY 2005/ 06 equal to 5%
in all non- safety departments. Revenue projections show that
expenditures will continue to exceed revenues in FY 2005/ 06 and FY
2006/ 07, requiring the City to spend all remaining fund balance and a
portion of the Budget Uncertainty Reserve to balance the budget. Given
continued economic uncertainty, the City cannot afford to restore
eliminated services or staff positions in FY 2006/ 07. Ongoing discussions
with the community about long- term revenue solutions will inform long-term
service planning.
2. The cost of continuing FY 2005/ 06 service levels in FY 2006/ 07
will exceed projected revenues, requiring the use of all
remaining fund balance and a portion of the Budget Uncertainty
Reserve to balance the budget.
Instead of spending all of the revenues received during the “ boom”
years of the late 1990s, the City set aside a portion of annual revenues
in General Fund fund balance for use in future years. Since the City
began cutting the budget in FY 2002/ 03, it has metered in use of the
fund balance annually as a resource to smooth the transition to a lower
revenue base. For example, the City spent $ 10 million of fund balance
in FY 2001/ 02 to cover the dramatic drop in revenues that was not
detected until late in the fiscal year. If not for this resource, the mid-year
budget cuts made that year would have been $ 10 million more
severe, which would have required sudden, drastic service reductions
to the community and sudden employee layoffs. By the end of FY
2005/ 06, the City expects to have spent approximately $ 15.8 million of
fund balance ( since FY 2001/ 02) to cushion the severity of budget
cuts. The FY 2006/ 07 budget assumes that $ 0.2 million of additional
fund balance and $ 1.4 million of the Budget Uncertainty Reserve will
be required to balance the budget and avoid sharper cuts in services.
3. Despite mixed signals, the economy will continue a modest
recovery during FY 2006/ 07, enabling ongoing General Fund
resources to increase by approximately 6%.
City of Fremont 2006/ 07 Adopted Operating Budget
42
General Fund Summary
Ongoing resources reflect the revenue “ base” that continues from year
to year, excluding one- time resources and losses. The growth is
attributable primarily to the continued strength of property tax revenues,
modest growth in the sales tax base, and modest growth in business
taxes, franchise fees, and property transfer taxes. While 6% projected
growth in total resources reflects some confidence that the economy
will grow, it is only on par with the 10- year historical average growth
rate. Meanwhile, the costs of maintaining current services, especially
those costs related to personnel, such as employee medical insurance,
workers’ compensation, and retirement, as well as fuel and electricity
costs, continue to rise. Therefore, projected revenue growth will only
enable the City to keep up with current costs, with no ability to restore
services that were eliminated in recent years.
4. The General Fund’s core reserves, totaling 15% of total
expenditures and transfers in, will remain unused for FY 2006/
07.
The City maintains two General Fund reserves, whose funding is linked
to total budgeted expenditures and transfers out: the Contingency
Reserve and the Program Investment Reserve. Balances and potential
use of the Contingency Reserve and the Program Investment Reserve
are governed by City Council policies adopted in FY 1996/ 97. The
Contingency Reserve is intended to mitigate the effects of natural
disasters or other severe unforeseen events and is to be maintained at
12.5% of total operating expenditures and transfers out. The Program
Investment Reserve is available to provide seed funding for new
initiatives that will generate ongoing external revenues; it is to be
maintained at 2.5% of total operating expenditures and transfers out.
Since the conditions for using these resources are not anticipated to be
present during FY 2006/ 07, these reserve balances are expected to
remain intact.
5. The budget for employee salaries assumes an increase of 3%
over the FY 2005/ 06 levels. Actual cost for salaries will be
determined through negotiations with employee bargaining units.
The FY 2005/ 06 budget included a 4% increase in salaries based on
negotiated Memorandums of Understanding ( MOUs) with the employee
bargaining units. All MOUs are open for either full- scope or limited
renegotiation in 2006. The 3% cost growth factor applied in the FY
2006/ 07 budget provides an estimate for budgeting purposes. If
negotiated salary increases vary significantly from the budget
assumption, staff will develop options for the City Council to adjust the
budget for consistency with the adopted MOUs after budget adoption.
7. Total expenditures in the FY 2006/ 07 budget and the related
forecast include a savings assumption of $ 1 million per year
( approximately 0.8% of total resources budgeted for use in FY
2006/ 07) to compensate for the historical tendency to under-spend
total resources allocated.
City of Fremont 2006/ 07 Adopted Operating Budget
43
General Fund Summary
Despite consecutive years of budget reductions, managers continue to
hold positions vacant and restrain operational costs wherever possible.
Consequently, the City’s actual expenditure totals each year have
consistently been at least $ 1 million less than projected previously.
Building an assumption for savings into the budget helps ensure that
projections for year- end results are more accurate from the outset
than they might otherwise be.
8. The budget contains no provision for future State resource
takeaways beyond those included in the FY 2005/ 06 State budget.
The City will respond to takeaways when the amount and timing
of takeaways are confirmed by State legislative action.
The FY 2005/ 06 budget included a $ 2.7 million property tax takeaway,
the second such annual takeaway adopted as part of the State’s FY
2004/ 05 budget. Unfortunately, despite these and other previous cuts
to local government, the State continues to face a multi- billion dollar
structural deficit in FY 2006/ 07 and beyond. In 2004, voters approved
Proposition 1A, which ostensibly provides protection for local revenues.
In reality, however, it only clarifies the rules by which the State may
take local revenues. For example, the State is no longer allowed to
take local revenues, unless it has paid back funds previously taken.
While Proposition 1A provides limited protection from State takeaways,
a permanent solution to the State’s problem will likely involve taking
some amount of City revenue.
Further takeaways would be catastrophic for public safety, public
facilities, and other services. Despite increased State revenues this
year, the State’s structural budget gap remains, leaving local governments
vulnerable to additional State takeaways beginning in FY 2008/ 09. This
is the first year, under the rules of Proposition 1A, that the State can
once again turn to cities to help balance its budget. Because it is difficult
to predict when, and if, the State will take additional local government
revenues, the budget does not assume a specific amount of revenues
that will be lost to the State, thereby minimizing the risks associated
with cutting services too far in anticipation of State cuts that may not
materialize. If it appears the State is thinking about additional takeaways,
staff will develop contingency plans so that the City may quickly respond
to State actions. To support this assumption, the budget contains a
Budget Uncertainty Reserve that could be used to forestall the need for
immediate service cuts.
Resources
General Fund resources include revenues, transfers into the General Fund
from other funds, undesignated fund balance, and General Fund Reserves.
Total budgeted resources will be adequate to support total budgeted
expenditures of $ 130.5 million, so the budget is considered balanced.
However, when one- time sources ( i. e., fund balance and reserves) are
City of Fremont 2006/ 07 Adopted Operating Budget
44
General Fund Summary
excluded, the sum of ongoing revenues, highlighted in Table # 1, plus recurring
transfers in from other funds, falls short of covering the service costs by
$ 1.6 million. Bridging the gap will require spending all of the remaining
fund balance, estimated to be $ 0.2 million, and $ 1.4 million from the Budget
Uncertainty Reserve.
Property taxes are projected to remain the City’s largest revenue source in
FY 2006/ 07. Despite the decline in other major revenues since the peak
year of FY 2000/ 01, property tax revenues have remained strong. Residential
property values comprise two- thirds of Fremont’s property tax base.
Relatively low mortgage interest rates and high demand for real estate
continue to drive residential property values higher. Property tax revenues
in FY 2005/ 06 are estimated to increase 6% over the prior year. Revenue
the City will receive in FY 2006/ 07 is based on property valuation as of
January 1, 2006, and reflects continued valuation strength and market vigor.
Therefore, property tax revenues are projected to grow by 6% in FY 2006/
07 to $ 41.3 million. Staff will continue to monitor the real estate market.
The effects of the current cooling trend in transaction volume will temper
staff’s outlook for FY 2007/ 08 growth, now projected at 5% growth.
Table # 1: Change in General Fund Resources
FY 2005/ 06 to FY 2006/ 07 ($ millions)
Revenues FY 2005/ 06 est. FY 2006/ 07 budget Difference
Property taxes $ 39.0 $ 41.3 +$ 2.3
Sales and use taxes 24.2 25.4 + 1.2
“ Triple flip” sales tax replacement 7.2 8.1 + 0.9
Vehicle License Fees ( VLF) 1.4 1.5 + 0.1
VLF property tax replacement 13.5 13.8 + 0.3
Business taxes 6.6 6.9 + 0.3
Franchise fees 7.6 8.0 + 0.4
Hotel/ motel tax 2.3 2.5 + 0.3
Investment earnings 2.7 2.8 + 0.1
Other revenues 10.1 11.1 + 1.0
Ongoing revenues subtotal 114.6 121.4 + 6.8
Recurring transfers from other funds 6.9 7.5 + 0.6
One- time losses/ bridging resources
Revenue loss ( State ERAF III) - 2.7 0.0 + 2.7
Use of undesignated fund balance 7.2 0.2 - 7.0
Use of Budget Uncertainty Reserve 0.0 1.4 + 1.4
Total budgeted resources $ 126.0 $ 130.5 $ 4.5
City of Fremont 2006/ 07 Adopted Operating Budget
45
General Fund Summary
In contrast to the consistently strong trend for property tax revenues, sales
tax trends are emblematic of the City’s revenue volatility. After reaching a
high point of $ 33.2 million in FY 2000/ 01, sales tax revenues endured a
multi- year decline to a low point of $ 26.8 million in FY 2003/ 04. The steep
drop was caused by the collapse of the Silicon Valley technology market
and Fremont’s reliance on sales taxes from high- tech manufacturers. Sales
taxes from the high- tech sector now appear to be stabilizing. In addition,
the City’s efforts to diversify and strengthen the sales tax base by increasing
the consumer retail sales and auto sales tax bases are beginning to pay off.
Based on recent quarters’ strong retail receipts, the City is projecting 13%
revenue growth for FY 2005/ 06. While the receipts from recent quarters
are encouraging, Chart # 1 illustrates the volatility that complicates
forecasting efforts. Staff is not yet confident that a long- term positive
trend is underway. Therefore, the revenue projections assume that sales
tax revenue will grow modestly, by 5%, for FY 2006/ 07.
The City now receives its sales tax revenues in two parts: 75% from the
traditional share of the sales taxes paid on consumer purchases, and 25%
from the “ triple flip” property tax replacement revenue. The “ triple flip”
refers to the State’s mechanism for financing its 2004 Economic Recovery
bonds, whereby the State receives 25% of cities’ sales tax revenues in
exchange for an equal amount of additional property taxes. The amount of
property tax replacement revenue is equal to 25% of “ regular” sales tax
revenues generated in the prior fiscal year. Since “ regular” sales tax
revenues areprojected to grow by 13% in FY 2005/ 06, the triple flip
replacement portion ( 25% of total) of the City’s sales taxes are projected
to grow by the same factor in FY 2006/ 07, yielding $ 8.1 million. The
aforementioned 5% growth rate is projected for the “ traditional” sales tax
( 75% of total), yielding $ 25.4 million in FY 2006/ 07. Together, both
components of sales tax are projected to total $ 33.5 million in FY 2006/ 07.
Vehicle license fee ( VLF) revenues also come to the City in two parts. The
first part, VLF paid by motorists, remains at one- third of historical levels.
* Data not necessarily reflective of actual revenues received. Data adjusted for economic period payment
irregularities to illustrate underlying economic conditions.
Chart # 1 - Sales Tax Volatility: FY 1999/ 00 -- FY 2005/ 06 ( Q4)
Quarterly Change* from Same Quarter of the Prior Year
- 20.0%
- 10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
FY 99/ 00 FY 00/ 01 FY 01/ 02 FY 02/ 03 FY 03/ 04 FY 04/ 05 FY 05/ 06
City of Fremont 2006/ 07 Adopted Operating Budget
46
General Fund Summary
VLF revenues are allocated statewide, based on population, and are expected
to grow by 5% in FY 2006/ 07. The second part comes in the form of
additional property taxes. Instead of receiving backfill for the remaining
two- thirds directly from the State General Fund, local governments now
receive additional property tax revenues. The amount received is based on
the City’s growth in assessed property valuation. Since the City’s assessed
valuation grew by 7.9% in FY 2005/ 06, staff expects the property tax
component of vehicle license fee revenues to grow by 7.9% in FY 2006/ 07.
After accounting for a one- time State payment of $ 0.7 million in FY 2005/
06, the total from both components is projected to grow from $ 14.9 million
in FY 2005/ 06 to $ 15.3 million in FY 2006/ 07.
Hotel/ motel tax revenues were rocked by the Silicon Valley recession. While
not the City’s largest revenue source, hotel/ motel taxes declined by the
largest percentage, a staggering 60%, between FY 2000/ 01 and FY 2003/
04. This decline is the most striking, and perhaps most symbolic, example
of revenue volatility stemming from the downturn in the economy. Between
FY 1998/ 99 and FY 1999/ 00, hotel/ motel tax revenues nearly doubled,
growing to $ 4.3 million in FY 2000/ 01 before dropping to a low of $ 1.8
million in FY 2001/ 02. Five years after the sharp drop, staff believes that
the hotel market may have stabilized; monthly receipts through February
2006 show approximately 15% revenue growth from the same period of
2005. The FY 2006/ 07 projection of 10% growth, which would yield $ 2.5
million in revenues, reflects cautious optimism that the rebound will continue.
Business taxes and franchise fees remain relatively stable, with moderate
growth projected for both. Business taxes are projected to yield $ 6.6 million
in FY 2005/ 06, and $ 6.9 million in FY 2006/ 07. The City levies franchise
fees on providers of electricity, natural gas, residential garbage and recycling,
and cable television services. Franchise fee revenues are based on
franchisee gross revenues, which are largely a function of rates and customer
usage. Electricity and gas franchise fees are the most volatile, and have
the largest effects on City revenues. Franchise fee revenue was virtually
flat for FY 2005/ 06, mostly because PG& E held rates constant during the
fee reporting period. Planned electric and gas rate increases for FY 2006/
07 are driving staff’s projection for 5% revenue growth, which would result
in $ 8.0 million in total fee revenues.
Table # 1 includes a line for “ other revenues,” which contains charges for
services, law enforcement fines, paramedic fees, and State reimbursements
for mandated services. With the exception of law enforcement fines, the
revenues in this category are each projected to grow at a rate of 3- 5%,
comprising $ 0.6 million of the increase. The balance of the projected increase
is attributable to $ 0.4 million in additional revenues from fines resulting
from expansion of the red- light enforcement program. Much of the new
revenue will be required to offset the cost of expanding the program.
The General Fund receives transfers from other funds for general government
services ( such as human resources, finance, and legal assistance) provided
to operations funded outside the General Fund ( such as development services
and recreation services). Charges are based on the non- General Fund
operation’s proportional share of the total operating budget expenditures
City of Fremont 2006/ 07 Adopted Operating Budget
47
General Fund Summary
and transfers out. This proportional share of the total budget is the share of
general government service costs allocated. In FY 2005/ 06, transfers in
from other funds are projected to be $ 6.9 million. Based on budgeted
expenditures, transfers in are expected to total $ 7.5 million in FY 2006/ 07.
Undesignated fund balance is another resource available to balance the
budget. If, in a given year, total resources available exceed total uses, the
“ surplus” increases fund balance. Fund balance has been a crucial resource
for cushioning the City’s transition to a lower revenue base in recent years.
Instead of spending all of the revenues received during the “ boom” years
of the late 1990s, the City set aside a portion of annual revenues in fund
balance for use in future years. When revenues dropped suddenly during
FY 2001/ 02 and the City anticipated a year- end budget shortfall, the City
used $ 10 million of fund balance to balance the budget. If fund balance had
not been available, the City would have had to use reserve funds or suddenly
cut services, through staffing layoffs, to end the year in financial balance.
The City is expecting to spend $ 7.3 million of fund balance in FY 2005/ 06 to
cover the expected budget shortfall caused by several factors: 1) a $ 2.7
million State takeaway, 2) increased costs to pay interest on the City’s
variable rate debt, and 3) a one- time transfer of $ 4.1 million to the Budget
Uncertainty Reserve. The transfer is the final step in resolving a multi-year
sales tax appeal to the State Board of Equalization ( SBE) related to
$ 4.1 million of sales tax revenue generated in Fremont that the SBE had
incorrectly allocated to other communities. Resolution of the appeal required
the City to recognize the revenue in FY 2004/ 05. In FY 2005/ 06, the City
Council transferred the revenue to the Budget Uncertainty Reserve pending
further consideration of budget priorities. Using $ 7.3 million of fund balance
in FY 2005/ 06 would leave only $ 0.2 million of undesignated fund balance
for use in the future. The FY 2006/ 07 budget assumes that the remaining
fund balance and $ 1.4 million of Budget Uncertainty Reserve funds will be
required to balance the budget and avoid further cuts in services.
Expenditures
The City has been transitioning to a permanent lower revenue base for
several years. The tech sector recession that began in 2001, coupled with
the terrorist attacks of September 11, 2001, caused a dramatic drop in City
revenues in FY 2001/ 02 and FY 2002/ 03. That relatively sudden revenue
shock prompted budget cuts for FY 2003/ 04 of greater than 20% and service
cuts throughout the City organization. These cuts were disruptive to the
community and to City employees; 224 positions were eliminated,
approximately half of which were filled and required layoffs. While difficult,
the FY 2003/ 04 reductions afforded the City some time during FY 2004/ 05,
without budget cuts, to monitor the economy and survey the community
before making further budget and service cuts. Following a rejected revenue
ballot measure in November 2004 that would have enabled the City to
close the budget gap and restore services, the City cut ongoing costs once
again, equal to 5% in all non- safety functions, for the FY 2005/ 06 budget.
City of Fremont 2006/ 07 Adopted Operating Budget
48
General Fund Summary
These reductions, along with the use of fund balance to prevent deeper
cuts, helped the City bring ongoing costs into line with a permanently lower
revenue base. Projected service costs for FY 2006/ 07 continue to exceed
ongoing revenues, but the availability of fund balance and the Budget
Uncertainty Reserve will enable the City to avoid further service reductions
this year while discussions with the community about permanent solutions
continue.
FY 2006/ 07 budgeted expenditures and transfers to other funds total $ 130.5
million. The budget maintains the City Council’s long- time funding priorities
by allocating 76% of the budget to direct costs for public safety and
maintenance ( in Chart # 2, maintenance is represented by the General Fund
budget for Transportation and Operations, and Parks and Recreation). As
Chart # 3 shows, the share of General Fund resources budgeted for these
purposes is actually 86%, when overhead costs required to support them
Charts # 2 and # 3: FY 2006/ 07
General Fund Budgeted Expenditures and Transfers Out
are allocated. Maintaining these priorities within constrained revenues and
in the face of rising costs makes it impossible for the City to continue
providing other services at the levels the community has come to expect.
The FY 2006/ 07 budget continues all of the service reductions implemented
since FY 2001/ 02. The “ Budget Overview” section of this document
chronicles the service impacts of recent budget cuts in more detail. Without
new revenues, services will continue to deteriorate, and slow revenue growth
will preclude the investments required to keep Fremont a high- quality
community.
The $ 130.5 million budgeted for ongoing services in FY 2006/ 07 is 7%
higher than comparable expenditures and transfers out in FY 2005/ 06. The
budget does not fund any new programs or new positions; increases are
attributable to rising costs of maintaining the existing, reduced, service base.
Distributed by Department
Community Development
2%
Capital projects
2% Other
3%
Parks & Recreation
6%
Human Services
2%
Debt Service
6%
General Government
9%
Trans. & Ops.
12% Fire
21%
Police
37%
Distributed by Function
Other
4%
Capital Projects
Community Development 2%
2% Recreation
2%
Human Services
3%
Maintenance
20%
Fire
24%
Police
43%
City of Fremont 2006/ 07 Adopted Operating Budget
49
General Fund Summary
Like all businesses, the City must cope with rising costs for everything from
service contracts and utilities to employee salaries, health care, and workers’
compensation.
Basic city services, such as police, fire, and maintenance, are labor- intensive.
Therefore, the City’s budget is largely driven by labor- related costs, including
salaries, health benefits, and retirement system contributions. These costs
comprise 81% of the FY 2006/ 07 budgeted expenditures ( excluding transfers
out to other funds), or $ 75.5 million. These costs, in total, are increasing
3% from FY 2005/ 06 levels. Notably, retirement system costs are
decreasing by $ 500,000 for FY 2006/ 07.
Risk management costs, specifically workers’ compensation and general
liability, and rising interest rates are other significant factors in overall cost
increases for FY 2006/ 07. The budget for workers’ compensation is
increasing $ 400,000, based on recent actuarial studies that reflect increasing
injuries in public safety departments. In the general liability area, actual
costs have not increased significantly, but a change in the way the City
budgets for an annual premium rebate requires a budget increase of
$ 500,000. Beginning in FY 2006/ 07, the budget will include the full premium
amount, and the rebate received will reduce actual expenditures for the
year, and will then be reflected in funding needs in the following fiscal year.
Additional information on Risk Management costs may be found in the
Internal Service Fund section of this document.
Other cost increases for FY 2006/ 07 are routine and modest, linked to
assumptions for general consumer inflation. The budget for materials,
supplies, and other non- staffing items is increasing by 1%.
Transfers Out to Other Funds
In addition to direct expenditures, the General Fund transfers resources to
other funds to support activities that cannot be supported through fees,
grants, or charges for service. These activities range from capital projects
and debt service, to maintenance and certain cost center operations, to
reserve accounts with specific purposes. The transfer supporting debt
service costs is the most significant change from the FY 2005/ 06 level.
Approximately $ 1.1 million of the $ 1.7 million budget increase results from
rising interest rates on the City’s variable rate debt. The remaining $ 600,000
reflects the end of a “ credit” in FY 2006/ 07 that has provided budget relief
in recent years. The credit resulted from the decision in 2002 to cancel
plans to build Fire Station # 11 in light of the severe spending cuts underway
at the time. A portion of the proceeds from bonds that had been issued in
2002 for the construction of the new Maintenance Center and Fire Station
# 11 were reallocated to pay the debt service on those bonds. The use of
bond proceeds to repay debt saved the General Fund more than $ 2.9 million
in debt service over three years. With no proceeds remaining to offset
costs in FY 2006/ 07, the budget must increase to support the full cost of the
debt service for the Maintenance Center.
City of Fremont 2006/ 07 Adopted Operating Budget
50
General Fund Summary
The transfer to Maintenance is increasing by $ 1.0 million, which is 5%
more than the FY 2005/ 06 level. This amount will partially cover increasing
employee costs, information systems costs associated with the new
Maintenance Center, and the Maintenance share of increasing risk
management costs.
Transfers to cost centers, which are enterprise- like mechanisms for funding
the Community Development, Recreation, and Senior Center functions,
are increasing by $ 1.1 million, to $ 5.1 million total. The increase follows a
year during which the transfers to the Community Development and
Recreation cost centers were reduced by $ 500,000 each, on a planned
one- time basis ( in addition to the citywide 5% reduction), to help balance
the General Fund budget. After excluding the $ 1 million restoration of
General Fund support from the percentage change calculation, the ongoing
level of support for the function is increasing by 2% for FY 2006/ 07.
The General Fund contains three reserves that may be funded with annual
transfers from the General Fund:
• the Contingency Reserve, which is intended to help mitigate the effects
of natural disasters and severe, unforeseen events;
• the Program Investment Reserve, which provides a source of working
capital for new initiatives that have the potential to generate significant
funding from external sources; and
• the Budget Uncertainty Reserve, which is intended to offset quantifiable
revenue uncertainty in the budget.
Table # 2 summarizes the FY 2005/ 06 projected funding levels for each
reserve. Funding levels for the Contingency Reserve and the Program
Investment Reserve are linked to the amount of total expenditures and
transfers out budgeted each year ( 12.5% and 2.5%, respectively). Based
on the budget for expenditures and transfers out, the transfer to these
reserves will total $ 1.3 million in FY 2006/ 07. As the table below illustrates,
total General Fund reserves are increasing from $ 33.4 million to $ 34.6 million
to keep their balances in compliance with City Council reserve policies
( which can be found in the “ Policies and Glossary” section of this document).
The Budget Uncertainty Reserve does not have a targeted funding level,
so there is no required contribution in FY 2006/ 07.
Table # 2: General Fund Reserves
FY 2005/ 06 FY 2006/ 07 FY 2006/ 07 FY 2006/ 07
est. balance transfer projected use balance
Contingency Reserve $ 15.1 M $ 1.1 M $ 0.0 M $ 16.2 M
Program Investment Reserve 3.0 0.2 0.0 3.2
Budget Uncertainty Reserve 15.3 0.0 ( 1.4) 13.9
Total General Fund Reserves $ 33.4 M $ 1.3 M $( 1.4) M $ 33.3 M
City of Fremont 2006/ 07 Adopted Operating Budget
51
General Fund Summary
The FY 2006/ 07 budget does not anticipate the need to spend the City’s
two core reserves. Experience since FY 2001/ 02 has reminded the City
how quickly the economy can change or the State can take City revenues
to solve its problem. Related budget experience has further shown how
quickly one- time resources ( fund balance, for example) can be consumed
in response to sudden revenue losses. With these lessons in mind, the City
is reluctant to spend reserves. Reserves are one- time resources, and are
therefore not replaced once they are spent. For FY 2006/ 07, however, the
City is projecting the need to spend $ 1.4 million of the Budget Uncertainty
Reserve to help balance the budget.
Financial Forecast
The financial forecast is a planning tool that helps staff identify important
trends and anticipate the longer- term consequences of budget decisions.
While not perfect, the forecast tools have been instrumental for modeling
the effect of such recent budget issues as rising retirement system costs,
the short- and long- term consequences of issuing variable rate debt, and
potential scenarios of future revenue performance. The ability to model
cost and revenue trends beyond the next budget year helps the City make
proactive budget decisions early in an economic cycle, such as the recent
economic downturn. As a case in point, delaying the budget cuts adopted
with the FY 2003/ 04 budget would have resulted in even larger gaps to
close, and more drastic solutions to endure, in FY 2005/ 06 and FY 2006/ 07.
The forecast is not a plan, but a model based on cost and revenue assumptions
that are updated continuously. Of these components, future cost projections,
based on known costs, are relatively reliable. Revenue forecasts, on the
other hand, are based on assumptions related to future economic conditions,
which are fraught with uncertainty. Economic forecasts in financial markets
and the media swing from optimistic to pessimistic on a seemingly weekly
basis. For this reason, the forecast is updated continuously, and is the
subject of periodic City Council discussion.
Other key forecast assumptions:
• While Proposition 1A, passed by voters in 2004, provides limited
protection for local revenues, potential State revenue takeaways are
T ab le # 3: K ey G eneral F u n d R evenues: A nnual G row th
A ssump tion s
FY 2006/ 07
budget
FY 2 0 0 7 / 0 8
pro ject io n
P ro perty taxes 6% 5%
Sa le s and u se taxe s 5% 4%
Veh ic le lice nse fee s ( VLF) 5% 5%
VLF p ro perty tax rep lac ement 8% 7%
Business taxes 5% 5%
Hote l/ mo te l taxes 10% 10%
Franchise fees 5% 5%
City of Fremont 2006/ 07 Adopted Operating Budget
52
General Fund Summary
not predictable enough to warrant modeling, and are not included in the
forecast.
• Significant additional revenues within existing revenue categories ( e. g.,
property and/ or sales tax) due to planned new construction is included.
• All service reductions and corresponding budget reductions implemented
in prior years remain in place for the forecast period.
• Commitments are included for fund transfers contained in the adopted
FY 2005/ 06 – FY 2009/ 10 CIP/ ICAP.
• Commitments are included for all known and anticipated debt service.
The financial forecast may be found on page 71 of the budget document.
Projected costs exceed projected resources ( excluding fund balance and
reserves) through FY 2006/ 07. The forecast suggests that beginning in FY
2007/ 08, resources will be adequate to support the anemic service levels
adopted with the FY 2006/ 07 budget, albeit with practically no ability to
restore services or increase investments in maintenance or capital projects.
Without significant new resources, the City will be unable to deliver the
service levels the community expects and that make Fremont a great
community.
City of Fremont 2006/ 07 Adopted Operating Budget
53
General Fund
Operating
Resources
General Fund Available Resources
Fiscal Year 2006/ 07: $ 130,540,000
Property Tax
31%
In- lieu VLF
11%
Operating Transfers In
6%
Interest Income
1%
Other Revenues
3%
In- lieu Sales Tax
6%
Sales & Use Taxes
20%
Franchise Fees
2%
Hotel/ Motel Taxes
2%
Vehicle License Fees
1%
Other Taxes & Fees
16%
Budget Uncertainty Reserve
1%
O T f
City of Fremont 2006/ 07 Adopted Operating Budget
54
General Fund
Allocation of
Resources
General Fund Expenditures
Fiscal Year 2006/ 07: $ 93,919,000
General Fund Transfers Out
Fiscal Year 2006/ 07: $ 36,621,000
Other
Human Services 4%
3%
General Government
13%
Fire
29%
Police
51%
Reserves
3%
Maintenance & Capital
Projects
62%
Cost Centers
14%
Debt
21%
55
General Fund appropriations not directly associated with specific
departments are classified as “ nondepartmental.” Expenditures and certain
types of anticipated general savings that are not identified with or allocated
to individual departments are included in the non- departmental budget.
Budgeted Expenditures
• Annual Operating Contingency Account
• Employee leave cash- out
• Property tax administration fee and revenue
audit fees
• Other non- departmental
Non- Departmental Budget
$ 625,000
Non- Departmental
Budget
1,000,000
490,000
$ 2,555,000
440,000
City of Fremont 2006/ 07 Adopted Operating Budget
56
57
General Fund
Revenues
General Fund Revenue History and Forecast
( Excluding one- time effects and transfers- in )
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
95/ 96 96/ 97 97/ 98 98/ 99 99/ 00 00/ 01 01/ 02 02/ 03 03/ 04 04/ 05 05/ 06 06/ 07 07/ 08
$ Millions
FY 2006/ 07 projected revenue = $ 121.4 M
Change from FY 2005/ 06 = 6.0%
10- year historical average percentage change = 5.9%
Overview
Total FY 2006/ 07 General Fund estimated revenues ( excluding transfers
from other funds, fund balance, and reserves) are $ 121.4 million, which is
$ 6.8 million, or 6%, more than total on- going estimated revenues for FY
2005/ 06. The FY 2005/ 06 revenues were reduced by the second and final
$ 2.7 million shift of property tax to the State. Seventy- five percent of the
City’s revenue is controlled by the State, including property taxes, sales
taxes, and vehicle license fees; all of which the State has manipulated in
recent years.
In March 2000, Fremont and the rest of Silicon Valley were riding a stock
market crest and enjoying the fruits of that summer’s record shipments of
the high- tech products produced in the area. The winter 2000 “ dot- com”
collapse ushered in a recession that shook the stock market, decimated
local governmental revenues, and began a period of financial crisis for both
the City and the State of California. As the graph below shows, City
revenues declined sharply between FY 2000/ 01 and the end of FY 2002/
03.
Although the City’s revenue base and its local economy are showing signs
of revival, continuing uncertainty caused by both the unpredictable economy
and the lack of city- controlled revenue sources remains the central challenge
to budgeting revenues for FY 2006/ 07. This section provides additional
background and forecast information for the following key General Fund
revenues:
• Property Taxes
• Sales and Use Taxes – including “ triple flip” revenues
• Vehicle License Fees ( VLF) – including the VLF replacement revenues
• Franchise Fees
• Hotel/ Motel Taxes
• Business Taxes
City of Fremont 2006/ 07 Adopted Operating Budget
58
General Fund Revenues
Where Does Property Tax Go?
( Distribution of 1% tax paid on assessed property value)
State - ERAF
shift to schools
28%
Schools &
Colleges
23%
Special Districts
12%
Library
2%
Alameda County
General Fund
20%
City of
Fremont
15%
Property Taxes
Description: Property tax is an ad valorem tax ( based on value) imposed
on real property ( land and permanently attached improvements such as
buildings) and personal ( movable) property. Proposition 13, adopted by
California voters on June 6, 1978, created a comprehensive system for the
assessment and limitation of real property taxes. Property owners pay the
tax based on their real property’s adjusted assessed full value. Proposition
13 set the FY 1975/ 76 assessed values as the base from which future
annual inflationary assessed value increases would grow ( not to exceed
2% for any given year). The County Assessor also re- appraises each real
property parcel when there are purchases, construction, or other statutorily
defined “ changes in ownership.” Proposition 13 limits the property tax rate
to 1% of each property’s full value plus overriding rates to pay voters’
specifically approved indebtedness. Property taxes are the City’s single
largest revenue source, comprising approximately 35% of total FY 2005/ 06
projected revenues, or $ 39.0 million.
The City of Fremont receives 15 cents of every dollar of property tax paid
( see graph below). Alameda County and the Fremont Unified School District
receive most of the revenue from property taxes assessed on real property
located in the City.
Proposition 13 ( Section 1, Article XIIIA, of the State Constitution) transferred
control and accountability for property tax rates from city and county
governments to the State government. It allows the State Legislature to
apportion property tax collections among the various cities, counties, and
special districts “ according to law.” In the late 1970s, the State Legislature
settled on an allocation method under which each local government’s
percentage share of property taxes was the same as that government’s
prorated share of the entire county’s property taxes in the mid- 1970s.
Beginning in 1992, the Legislature reduced city allocations through the
ERAF I and ERAF II legislation so that tens of millions of dollars in City
property taxes were transferred to the schools. This shift costs the City of
City of Fremont 2006/ 07 Adopted Operating Budget
59
General Fund Revenues
Property Tax History and Forecast
( FY 1995/ 96 - FY 2007/ 08)
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
95/ 96 96/ 97 97/ 98 98/ 99 99/ 00 00/ 01 01/ 02 02/ 03 03/ 04 04/ 05 05/ 06 06/ 07 07/ 08
FY 2006/ 07 projection= $ 41.3 M
FY 2006/ 07 projected change= 6.0%
10- year historical average change= 6.5%
Fremont approximately $ 12 million per year. More recently, in FY 2003/ 04,
the Legislature again re- allocated property taxes by adopting ERAF III.
This cost the City of Fremont and the Redevelopment Agency $ 5.4 million
and $ 4.6 million, respectively, in FY 2004/ 05 and FY 2005/ 06.
California voters passed Proposition 1A on November 4, 2004, giving
California cities some relief from future State tinkering with traditionally
local revenues. The State Legislature can only change city property tax
allocations in emergencies upon a two- thirds vote in both legislative bodies,
and then for only two years before the revenue has to be repaid. While not
perfect, these provisions help reduce the City’s revenue uncertainty
somewhat for FY 2006/ 07.
Forecast: Property tax revenues are projected to total $ 39.0 million in FY
2005/ 06. Staff projects a 6% growth rate for FY 2006/ 07, which would
yield $ 41.3 million.
Including inflationary growth ( based on Consumer Price Index increases
with a maximum increase of 2% over a property’s prior year full value
assessment), City real property assessed values increased at almost an 8%
clip because of the Bay Area’s phenomenal housing market over the last
three years. Real estate sales volume slowed in early 2006, but both volume
and values remain strong by historical standards. Fremont housing market
price increases over the past five years established the basis for projected
property tax growth in FY 2006/ 07 because the taxes are based on January
1, 2006 assessments.
City of Fremont 2006/ 07 Adopted Operating Budget
60
General Fund Revenues
Key Factors in the Forecast: The most significant property tax revenues
indicator is the change in property assessed values. Properties are re-appraised
upon most ownership changes and for new construction. Strength
in Fremont’s real estate market drove both the assessed values and City
revenue growth in the second half of the 1990s, and again in the middle
2000s. The taxes for FY 2006/ 07 were assessed effective January 1,
2006, so price declines that might be caused by interest rate hikes and other
market influences will not change these values. Even a moderate decline
in housing sales prices ( as forecast by certain economists) will not seriously
strain the City’s FY 2006/ 07 revenue forecasts because the taxes are based
on the January 1, 2006 assessment.
However, interest rate increases pose a risk to the housing market’s
continuing vitality. Much of the value run- up relates to historically low
home mortgage interest rates. These low rates may be ending. The federal
central bank’s Federal Open Market Committee ( FOMC) reduced the
federal discount interest rate 13 times after the dot- com collapse and the
September 11, 2001 terrorist attacks. This rate reached 1% on June 25,
2003, and stayed there for a year. Since June 2004, the FOMC raised this
key rate in 15 one- quarter percent increments until it stood at 4.75% on
March 28, 2006. FOMC committee member comments suggest that more
rate increases are likely. Although the federal discount rate is a short- term
rate used for overnight borrowings by Federal Reserve System banks, it
has a wide- spread effect on the financial markets. These rate increases
put upward pressure on home mortgage rates — especially adjustable-rate-
mortgages ( ARM) that are tied to interest rate indices.
By some estimates, more than 30% of the home sales in California are now
financed by ARM loans. Higher interest rates could cause these mortgage
interest rates to reset to the higher rates. Although many economists discount
the possibility of a “ housing bubble burst” similar to the dot- com collapse, a
significant housing adjustment could dampen the overall local economy.
Substantial real property sales volume and property value declines pose
economic risks to future City property tax and sales tax growth rates. Sales
taxes could be affected by a reduction in consumer purchasing power in
the face of falling home values.
The fledgling high- tech industry recovery is encouraging, but still fragile.
Although not a factor to date, vacant commercial, research, and/ or industrial
properties increase the risks of property valuation appeals ( lower re-appraised
values can reduce assessments and revenues) and of property
tax payment delinquencies. Commercial and industrial properties comprise
about one- third of Fremont’s property tax base.
The State projects that its revenues will be sufficient to meet its financial
obligations in FY 2006/ 07, but that optimism rests on one- time revenues
related to recently surging personal income and corporate tax receipts.
While Proposition 1A provides limited protection from future State take-aways,
beginning in FY 2008/ 09, the State could again “ borrow” property
tax and/ or sales tax
City of Fremont 2006/ 07 Adopted Operating Budget
61
General Fund Revenues
revenues from local agencies on a two- thirds vote of the Legislature if a
new financial crisis develops.
Despite risks to the property tax base, the steady property transfer tax
revenues reflected in the chart above provde evidence that Fremont real
property is still changing hands through real estate transactions. This activity
decreases the possibility of steep negative adjustments to property tax
revenues. Generally, real property transactions that generate property
transfer taxes also trigger re- assessment under Proposition 13.
Sales and Use Tax
Description: The local sales and use tax rate is 8.75%. Sales tax is
collected on the sale of taxable goods within Fremont. Use tax is the
corresponding tax on transactions involving taxable goods purchased out of
state for use or storage in Fremont. Sales and use taxes are collected by
the State which then pays local government its respective share. Sales and
use taxes ( collectively, “ Sales Taxes” in the budget) are the City’s second-largest
revenue source and comprise about 28% of FY 2006/ 07 General
Fund revenues.
In March 2004, California voters passed Proposition 57 approving the sale
of State Economic Recovery Bonds. The bond proceeds were used to
fund the State’s cashflow deficit and avert an operational financial crisis.
To issue the bonds, the State needed a steady revenue source it could
pledge to secure its payments – like sales taxes. To solve its problem, the
State implemented the “ triple flip.” Under the “ triple flip,” the State’s bonds
are secured by a quarter cent increase in the State’s share of sales tax with
a corresponding decrease in local governments’ share of sales tax ( there
was no sales tax rate change). To compensate for the loss, local governments
will receive additional real property taxes, that would otherwise go to the
schools ( which will receive State General Fund payments), until the State’s
Economic Recovery Bonds are repaid. The additional property taxes are
to replace the lost sales taxes on a dollar- for- dollar basis.
Property Transfer Tax
FY 1997/ 98-- FY 2006/ 07
0.0
0.5
1.0
1.5
2.0
2.5
97/ 98 98/ 99 99/ 00 00/ 01 01/ 02 02/ 03 03/ 04 04/ 05 05/ 06 06/ 07
$ Millions
City of Fremont 2006/ 07 Adopted Operating Budget
62
Before FY 2004/ 05, the sales tax rate in Fremont was 8.25%. The City
received 12.1% of the tax paid, which was approximately 1% of the price
paid for the good. In March 2004, Alameda County voters passed Measure
A, which raised the sales tax rate by 0.5% to 8.75% to fund County Health
Care Services. As shown below, the City’s receives 0.75% of each taxable
sale, which equates to 8.6% of total sales tax revenues collected by all
jurisdictions, down from the 12.1% we used to receive.
* Alameda County receives a 5% share of the City’s share of sales taxes, or 0.05% of
the total. This means that the City’s actual share is 0.71% after the triple flip.
Forecast: FY 2005/ 06 sales tax revenues, including the “ triple flip”
replacement, are projected to be $ 31.4 million. The FY 2006/ 07 budgeted
amount is $ 33.5 million, or $ 2.1 million more. For projection purposes, sales
taxes have several components: the local retail economic base, the property
tax replacement related to the triple flip, and Proposition 172 sales tax
revenue. The following table relates the component projections to the total.
General Fund Revenues
Where Does Sales Tax Go?
( Distribution of 8.75% paid, including the effect of the
“ triple flip” legislation)
City of Fremont
0.75%*
BART 0.5%
Prop. 172 0.5%
Countywide
Transportation
0.75%
County Health &
Welfare 0.5%
County Health Care
Services 0.5%
State 5.25%
The local retail economic base is generally considered “ regular” sales tax.
It is the 0.75% of the price paid for taxable goods, referenced above, that is
received by the City. Of the $ 2.1 million projected increase, approximately
Projection component FY 2005/ 06 est. FY 2006/ 07 proj. Difference
“ Regular” retail sales economy $ 22.9 M $ 24.0 M +$ 1.1 M
“ Triple flip” property tax replacement 7.2 8.1 + 0.9
Prop. 172 sales tax 1.3 1.4 + 0.1
Total $ 31.4 M $ 33.5 M +$ 2.1 M
es
Sales Taxes
City of Fremont 2006/ 07 Adopted Operating Budget
63
General Fund Revenues
$ 1.1 million is attributable to growth in the retail base. This increase of 5%
from the FY 2005/ 06 level reflects staff’s assumption for modest economic
growth in FY 2006/ 07. Staff expects existing retail businesses to generate
two- thirds of this amount, with the remaining one- third coming from new
retail opening in FY 2006/ 07 at Pacific Commons and other locations in
Fremont.
The “ triple flip” property tax replacement revenues are projected to increase
by $ 0.9 million in FY 2006/ 07. The replacement revenues the City receives
is based on the growth in “ regular sales tax” revenues from the prior year.
Since sales tax revenues are projected to grow by 13% in FY 2005/ 06; the
“ triple flip” component of FY 2006/ 07 sales taxes are projected to grow by
the same amount.
Prop. 172 sales taxes are the City’s share of the one- half cent sales tax for
public safety services approved by California voters in 1993. In FY 2005/
06, the City’s share is expected to be $ 1.3 million. Unlike “ regular” sales
tax revenues, which are based on retail activity in Fremont, Prop. 172 is
collected statewide, so annual changes more closely resemble the state-wide
retail economy. For FY 2006/ 07, the statewide sales tax revenues are
projected to grow by 5%, so the Prop. 172 component of the City’s sales
taxes are projected to be $ 1.4 million. Annual growth or decline in Prop.
172 sales taxes are the final component of the total sales tax projection.
The graph below displays the sales tax forecast. In FY 2004/ 05, the City
began to receive “ triple flip” property tax payments. The darker bars on
the graph represent traditional sales tax dollars ( including Prop. 172 revenue),
and the gray portion of the bars represent property tax dollars the City is
receiving in lieu of sales taxes under the “ triple flip.”
Key Factors in the Forecast: The FY 2006/ 07 sales tax revenue budget
( including the “ triple flip” property tax reimbursements) remains $ 1 million
less than the $ 34.5 million in actual FY 2000/ 01 sales tax revenues. The
Business and Industry segment includes most business- to- business activity
and remains the largest segment of the sales tax pie. This segment grew
from 30% of the tax base in FY 1990/ 91 to 41% in FY 2000/ 01. The high-
Sales Tax History and Forecast
( FY 1995/ 96 - FY 2007/ 08, excluding one- time effects)
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
95/ 96
96/ 97
97/ 98
98/ 99
99/ 00
00/ 01
01/ 02
02/ 03
03/ 04
04/ 05
05/ 06
06/ 07
07/ 08
$ Millions
FY 2006/ 07 projection= $ 33.5 M
FY 2006/ 07 projected change= 6.7%
City of Fremont 2006/ 07 Adopted Operating Budget
64
General Fund Revenues
tech sector recession that began in 2001 continues to dampen business- to-business
sales levels. For FY 2005/ 06, it will only constitute about 29% of
the sales tax base. This City revenue remains vulnerable to any weakness
in the Silicon Valley economy. The City’s largest sales tax segments are
highlighted in the following graph.
}
Since the peak year of FY 2000/ 01, revenue from the Business and Industry
sector has decreased by one- third, or approximately $ 4 million. Most other
retail categories have been stable or have increased modestly. The FY
2006/ 07 budget assumes that the economy will